Court Opinion

ID: 194697
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:23:00+00
Date Added: 2024-06-11T13:14:45.167020
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UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT

                                             

No. 91-1602

                      METCALF & EDDY, INC.,

                       Plaintiff, Appellee,

                                v.

            PUERTO RICO AQUEDUCT AND SEWER AUTHORITY,
                      Defendant, Appellant.

                                             

                 ON REMAND FROM THE SUPREME COURT
                       OF THE UNITED STATES

                                             

                              Before

                       Breyer, Chief Judge,
                                          

                  Aldrich, Senior Circuit Judge,
                                               

                    and Selya, Circuit Judge.
                                            

                                             

     Perry M. Rosen,  Paige E.  Reffe, Thomas D.  Roth, Cutler  &
                                                                 
Stanfield, Arturo Trias, Hector Melendez Cano, and Trias, Acevedo
                                                                 
& Otero on supplemental brief for appellant.
       
     Peter W.  Sipkins, Dorsey & Whitney,  Jay A. Garcia-Gregory,
                                                                
and  Fiddler,  Gonzalez &  Rodriguez  on  supplemental brief  for
                                    
appellee.

                                             

                           May 3, 1993

                                             

          SELYA, Circuit  Judge.   Notwithstanding that  trial is
          SELYA, Circuit  Judge.
                               

still  some distance  away, this  diversity case  alights on  our

doorstep for the second time.  The appellate roundelay began when

Metcalf  & Eddy,  Inc. (M&E)  sued the  Puerto Rico  Aqueduct and

Sewer  Authority (PRASA)  for  damages in  Puerto Rico's  federal

district court.  In the course of pretrial proceedings, the court

denied PRASA the  benefit of  Eleventh Amendment  immunity.   The

disappointed   defendant   essayed   an   interlocutory   appeal.

Following circuit precedent, see Libby  v. Marshall, 833 F.2d 402
                                                   

(1st   Cir.  1987),   we  dismissed  the   appeal  for   want  of

jurisdiction.  M&E  v. PRASA, 945  F.2d 10,  14 (1st Cir.  1991).
                            

The Supreme  Court granted certiorari and,  resolving an existing

split in  the circuits, determined that  pretrial orders granting

or  denying   Eleventh   Amendment  immunity   were   immediately

appealable.  PRASA v. M&E, 113 S. Ct. 684, 689 (1993).
                         

          PRASA's appeal returns to us on remand from the Supreme

Court.   This  time  around, we  must address  the merits  of the

ruling  below.      After  reviewing   supplemental  briefs   and

considering  PRASA's  overall   relationship  with  the   central

government of Puerto Rico, we  affirm the district court's denial

of Eleventh Amendment immunity.

                                I.
                                  

                        Setting the Stage
                                         

          Puerto  Rico's  legislature  created PRASA  over  forty

years ago in order to provide safe drinking water for inhabitants

and  to manage wastewater treatment.  See P.R. Laws Ann. tit. 22,
                                         

                                2

   141-168 (1987 & Supp. 1989).  PRASA's stewardship has not been

without blemish.  The incident that sparked this suit occurred in

1985,  when  the United  States  Environmental  Protection Agency

(EPA)  brought an enforcement action  pursuant to the Clean Water

Act,  33  U.S.C.      1251-1376  (1988),  seeking  to  provoke  a

substantial   modernization   of  PRASA's   wastewater  treatment

facilities.

          In due  course, PRASA  and EPA signed  a consent  order

limning the  changes necessary to bring  PRASA's treatment system

into  compliance.     Toward  that  end,   PRASA  hired  M&E,   a

Massachusetts-based engineering firm with professed  expertise in

wastewater  management,  to  oversee  the  refurbishment.   M&E's

duties  included contracting for design and construction services

on PRASA's behalf, procuring necessary equipment, and supervising

work on the  project.  M&E was to be  remunerated on a time-plus-

expense basis, invoiced as  accrued.  Bills were due  and payable

within thirty days of presentment.

          Over time, project  expenditures mushroomed well beyond

budget.   As costs mounted, PRASA  grew increasingly inhospitable

to M&E's  invoices.  The  denouement occurred when  PRASA, amidst

charges  of  skulduggery,  suspended  all  payments  to  M&E  and

demanded a complete audit.   M&E consented to the audit,  but did

not acquiesce in the cessation of payments.  The audit dragged on

and  PRASA accumulated  a huge  stockpile of  M&E invoices.   Its

financial plight ingravescent, M&E sued before  the audit had run

its   course  to   force  payment   of  the   arrearage  (roughly

                                3

$52,000,000).

          Confronted  by  defendant's  motion  to   dismiss,  the

district court determined as a  matter of law that PRASA did  not

enjoy  Eleventh Amendment  immunity.   In so  holding,  the court

stressed  that PRASA possessed  the "ability  to raise  funds for

payment  of   its  contractual   obligations"   and,  thus,   its

obligations  "do not  affect  the Commonwealth's  funds."   PRASA

appeals  this decision as a  legal rather than  a factual matter.

Although there may  sometimes be genuine issues  of material fact

sufficient to preclude  brevis disposition in Eleventh  Amendment
                              

litigation,  there are none here.   Agreeing with  PRASA that the

issue in this case is one of law, we afford plenary review to the

district court's denial  of immunity.   See Dedham  Water Co.  v.
                                                             

Cumberland  Farms Dairy, Inc., 972 F.2d 453, 457 (1st Cir. 1992);
                             

New England  Legal Found. v.  Massachusetts Port Auth.,  883 F.2d
                                                      

157, 167 (1st Cir. 1989).

                               II.
                                  

                             Analysis
                                     

                                A.
                                  

               The Eleventh Amendment:  An Overview
                                                   

          In Chisholm  v. Georgia, 2  U.S. (2 Dall.)  419 (1793),
                                 

the  Supreme Court held that  the federal courts had jurisdiction

to  hear a  South Carolina  citizen's suit  against the  State of

Georgia.  This result,  popularly perceived as a threat  to state

autonomy  in   a  newly   minted  federal  system,   produced  an

overwhelmingly  negative reaction.   See  Edelman v.  Jordan, 415
                                                            

                                4

U.S.  651, 662  (1974).  Ratification  of the  Eleventh Amendment

followed apace.1

          On  its face,  the  amendment appeared  to introduce  a

fairly  simple proposition into our constitutional jurisprudence.

Nevertheless,  driven by  the  pressure of  pragmatic  necessity,

judicial sketching of the  amendment's scope and requirements has

displayed  a creative  bent.   Under the  gloss supplied  by this

abstract impressionistic  flair, the federal courts  now read the

Eleventh  Amendment,  notwithstanding   its  plain  language,  to

prohibit  them from hearing most suits brought against a state by

citizens  of that  or any  other state.2   See  De Leon  Lopez v.
                                                              

Corporacion Insular de Seguros, 931 F.2d 116, 121 (1st Cir. 1991)
                              

(collecting cases); see also Edelman, 415 U.S. at 662-63.
                                    

          Withal, there are apertures in the Eleventh Amendment's

protective  swaddling.  If a case falls within one of these gaps,

the Eleventh Amendment will not bar  maintenance of the suit in a

federal  court.  See Ramirez v.  Puerto Rico Fire Serv., 715 F.2d
                                                       

694, 697, (1st Cir. 1983) (explaining that the Eleventh Amendment

                    

     1The Amendment reads:

               The Judicial power  of the United States
          shall not be construed  to extend to any suit
          in  law  or equity,  commenced  or prosecuted
          against one of the United States by  Citizens
          of another State, or  by Citizens or Subjects
          of any Foreign State.

U.S. Const. amend. XI.

     2There  is,   of  course,   an  exception   for  prospective
injunctive relief.  See, e.g., Ramirez v. Puerto Rico Fire Serv.,
                                                                
715 F.2d 694, 697 (1st Cir. 1983).

                                5

"bars federal  court lawsuits by private parties  insofar as they

attempt  to impose  liabilities necessarily  payable from  public

coffers, unless the  state has  consented to suit  or unless  the

protective  cloak of the amendment  has been doffed  by waiver or

stripped  away  by  congressional  fiat").    Specifically,   the

amendment's  raiment unravels  if any  one of  four circumstances

eventuates: a state  may randomly  consent to suit  in a  federal

forum, see,  e.g., Paul N. Howard Co. v. PRASA, 744 F.2d 880, 886
                                              

(1st Cir. 1984), cert. denied, 469 U.S. 1191 (1985); a  state may
                             

waive  its  own  immunity by  statute  or  the  like, see,  e.g.,
                                                                

Edelman, 415 U.S.  at 673; Congress may  sometimes abrogate state
       

immunity (so long as it speaks clearly and acts in furtherance of

particular powers),  see, e.g.,  Fitzpatrick v. Bitzer,  427 U.S.
                                                      

445,  451-54  (1976);  or   under  certain  circumstances   other

constitutional imperatives may take  precedence over the Eleventh

Amendment's federal-court  bar, see Pennhurst State  Sch. & Hosp.
                                                                 

v.  Halderman,  465  U.S.  89, 99  (1984)  (involving  Fourteenth
             

Amendment); Bitzer, 427 U.S. at 456 (same).
                  

          Here,  M&E does  not argue that  PRASA consented  to be

sued,  that Puerto  Rico waived  PRASA's immunity,  that Congress

abrogated  PRASA's immunity, or that some  other provision of the

federal Constitution  has usurped  the field.   Hence, this  suit

skirts the gaps.  Rather, it is a "pure" Eleventh Amendment  case

in  which this  court  must focus  on  whether PRASA  enters  the

                                6

Eleventh Amendment's sphere at all.3

                                B.
                                  

                             The Test
                                     

          The mere imprimatur of state authority  is insufficient

to  inoculate  an agency  or  institution  against federal  court

jurisdiction.  A "slice  of state power," without more,  will not

sate the Eleventh Amendment.  Lake Country Estates, Inc. v. Tahoe
                                                                 

Regional Planning Agency, 440 U.S. 391,  401 (1979).  By the same
                        

token   and for much the same reasons   political subdivisions of

a state, such as  municipalities and counties, do not  lie within

the  Eleventh  Amendment's reach.   See,  e.g.,  Owen v.  City of
                                                                 

Independence,  445  U.S.  622,  650  (1980);  Moor  v. County  of
                                                                 

Alameda, 411 U.S. 693, 717-721 (1973).  Only the state itself and
       

"arms" of the state receive  immunity.  See PRASA v. M&E,  113 S.
                                                        

Ct.  at 689;  Alabama  v. Pugh,  438  U.S. 781,  782  (1978); see
                                                                 

generally  De Leon Lopez, 931 F.2d at 121 (discussing coverage of
                        

Eleventh Amendment).  Because PRASA is not an organic part of the

central government of Puerto Rico, we must investigate whether it

is sufficiently a part of the central government to be considered

an arm  of the state.  Framed in this  way, the question poses an

                    

     3We  have consistently treated Puerto  Rico as if  it were a
state for Eleventh Amendment purposes.  See, e.g., De Leon Lopez,
                                                                
931 F.2d at  121; Fred v. Roque, 916 F.2d 37, 38 (1st Cir. 1990);
                               
Paul N.  Howard Co., 744 F.2d  at 886; Ramirez, 715  F.2d at 697.
                                              
Although  M&E invites us to revisit this position, we decline the
invitation.  In a  multi-panel circuit, newly constituted panels,
generally speaking, are bound by prior  panel decisions on point.
See United States v. Gomez-Villamizar, 981 F.2d 621, 623 n.9 (1st
                                     
Cir. 1992); Jusino v.  Zayas, 875 F.2d 986, 993  (1st Cir. 1989).
                            
So it is here.

                                7

essentially functional  inquiry, not  easily amenable  to bright-

line answers or mechanical solutions.

          The Eleventh Amendment's primary concern is to minimize

federal courts' involvement in  disbursal of the state fisc.   It

follows that "when the action is  in essence one for the recovery

of money from the state, the state is the real, substantial party

in interest and is entitled to invoke its sovereign immunity from

suit . . . ."  Ford Motor Co. v. Department of Treasury, 323 U.S.
                                                       

459, 464 (1945); see also Lake Country Estates, 440 U.S.  at 400-
                                              

01  (identifying  the desire  to  protect state  treasuries  as a

driving force  behind adoption of the  Eleventh Amendment); Dugan
                                                                 

v. Rank, 372 U.S.  609, 620 (1963)  (recognizing "that a suit  is
       

against the sovereign `if the judgment sought would expend itself

on the public treasury or domain'") (citation omitted); Ainsworth
                                                                 

Aristocrat  Int'l Pty. Ltd. v.  Tourism Co., 818  F.2d 1034, 1037
                                           

(1st Cir.  1987) (similar).   Generally, if  a state has  a legal

obligation  to satisfy  judgments against  an institution  out of

public  coffers,  the  institution  is  protected   from  federal

adjudication by the Eleventh Amendment.  See Quern v. Jordan, 440
                                                            

U.S. 332, 337 (1979); Reyes v. Supervisor of DEA, 834  F.2d 1093,
                                                

1097-98 (1st Cir. 1987).

          Because it  is not  always limpid  whether, or to  what

extent, the state treasury must  stand behind the judgment  debts

of  a particular  institution, we  have identified  seven related

areas as prospects  for further  inquiry.  These  areas, each  of

which can  be  mined  for  information  that  might  clarify  the

                                8

institution's structure  and function, include:   (1) whether the

agency  has the funding power  to enable it  to satisfy judgments

without direct state participation or guarantees; (2) whether the

agency's function is governmental or proprietary; (3) whether the

agency is  separately incorporated; (4) whether  the state exerts

control  over the agency, and if  so, to what extent; (5) whether

the agency has the power to sue, be sued, and  enter contracts in

its  own name  and right;  (6) whether  the agency's  property is

subject  to  state  taxation;  and  (7)  whether  the  state  has

immunized  itself from  responsibility for  the agency's  acts or

omissions.     See  Ainsworth   Aristocrat,  818  F.2d   at  1037
                                          

(collecting  cases from  other  circuits recounting  the same  or

similar  factors).  The list  is not an all-inclusive compendium,

for other  areas  of inquiry  may  prove fruitful  in  particular

circumstances.   It is,  however, clear  that  all the  pertinent

factors have a common  orientation:  the more tightly  the agency

and  the state are entangled,  the more probable  it becomes that

the agency shares the state's Eleventh Amendment immunity.

                                C.
                                  

                        Applying the Test
                                         

          In Paul N. Howard Co., supra, we adjudicated  a similar
                                      

dispute involving PRASA's  renitency to make payments due under a

construction  contract.    744  F.2d at  881-84.    The plaintiff

prevailed in the district  court.  On appeal, PRASA  advanced for

the first time  an added defense  premised on Eleventh  Amendment

immunity.  Although we suggested rather strongly that PRASA might

                                9

"not qualify  for immunity under the Eleventh  Amendment," id. at
                                                              

886,  we did not conclusively resolve the issue because PRASA had

purposefully availed itself of the federal forum and  had thereby

lost whatever entitlement to Eleventh Amendment immunity it might

have possessed with  respect to  that particular suit.   See  id.
                                                                 

The case before us today requires that we return to, and resolve,

the question deferred  in Howard.4   Faithful to the  explication
                                

of legal principles set out above, see supra Part II(B), we first
                                            

examine  PRASA's  access  to   the  public  fisc  and  thereafter

scrutinize  how  the  associated  factors  are  arrayed  in  this

particular situation.

          1.   Access  to  the Commonwealth's  Treasury.   On the
          1.   Access  to  the Commonwealth's  Treasury.
                                                       

principal issue   PRASA's access to the Commonwealth's treasury  

the  die  is quickly  cast.   Puerto  Rico's legislature  made it

readily evident that PRASA

          shall have no  power at  any time  or in  any
          manner to pledge  the credit or  taxing power
          of the Commonwealth of  Puerto Rico or any of
          its  other political subdivisions.  The bonds
          and other obligations issued by the Authority
          shall not  be a  debt of the  Commonwealth of
          Puerto Rico nor of any of its  municipalities
          nor of  its other political  subdivisions and
          neither  the Commonwealth of  Puerto Rico nor
          any   such   municipalities  nor   its  other
          political   subdivisions   shall  be   liable
          thereon,  nor  shall  such  bonds   or  other
          obligations be  paid out  of any  funds other

                    

     4In  this quest,  we give  no weight  to the  Howard court's
                                                         
comments concerning  PRASA's immunity, for we  recognize that, as
dictum,  the comments  are  not binding.   That  is  not to  say,
however, that  Eleventh Amendment issues must  always be resolved
de novo.   Where the agency's  activity and its  relation to  the
       
state remain  essentially the same, prior  circuit precedent will
be controlling.

                                10

          than those of the Authority.

P.R. Laws Ann. tit. 22,   144.  The statute erects a wall between

the agency's appetite and the public fisc.  The existence of this

statutory  barrier presages the result  we must reach:   PRASA is

not an arm of the state for Eleventh Amendment purposes.5

          PRASA argues that,  notwithstanding the  Commonwealth's

disavowal  of its  liabilities,  the  Commonwealth's  significant

financial support  of PRASA's activities constitutes  the sort of

access  to   public  funds   that  triggers   Eleventh  Amendment

protection.   We do not  agree.  Although  the central government

subsidizes the agency to some extent, PRASA relies mostly on user

fees  and bonds to support  its operations.   The government does

not  give PRASA a blank  check or an  indeterminant carte blanche

allowing  it  to  draw  on  the  public  treasury  as  it  thinks

necessary.  Thus, control  of the money flow from  tax dollars is

unilateral; if the Commonwealth  chooses not to open  the faucet,

the agency must go thirsty or else, by resort to its own devices,

procure the funds needed to stay liquid.

          We think  PRASA's situation  is  not unlike  that of  a

typical  political subdivision.   Such  an entity  often receives

part  of  its  budget   from  the  state  and  raises   the  rest

independently.   Despite this dual  funding, such entities do not

                    

     5The statutory barrier is especially important in this case,
for  Puerto Rico's  legislature  has demonstrated  that, when  it
wishes  to  do   so,  it   knows  exactly  how   to  pledge   the
Commonwealth's resources in security for PRASA's debts.  See P.R.
                                                            
Laws  Ann. tit. 22,    168 (explicitly agreeing  to reimburse the
Farmers  Home  Administration  if  PRASA should  default  on  two
particular loans).

                                11

automatically  (or   even  usually)  come  within   the  zone  of

protection demarcated  by the Eleventh  Amendment.  Thus,  in Mt.
                                                                 

Healthy City  Sch.  Dist. Bd.  of Educ.  v. Doyle,  429 U.S.  274
                                                 

(1977), the Supreme Court  denied Eleventh Amendment sanctuary to

a school  board  despite the  "significant  amount of  money"  it

received  from the  state.   Id.  at 280;  accord Fitchik  v. New
                                                                 

Jersey Transit Rail Operations, Inc., 873 F.2d 655, 660 (3d Cir.)
                                    

(denying  immunity to  a  regional rail  authority despite  state

funding while noting "that  an entity derives some of  its income

from the  state does not mean  that it is entitled  to partake of

the  state's immunity"), cert. denied, 110 S. Ct. 148 (1989); see
                                                                 

also  Blake  v.  Kline,   612  F.2d  718,  723  (3d   Cir.  1979)
                      

(recognizing  that  "the  nature  of the  state's  obligation  to

contribute   may  be  more   important  than  the   size  of  the

contribution"), cert. denied, 447  U.S. 921 (1980).  The  case at
                            

bar is cut from much the same cloth.

          We hold,  therefore, that  a state agency  cannot claim

Eleventh Amendment  immunity solely  on the basis  that judgments

against  it may  absorb unrestricted funds  donated by  the state

and,  in that  way, redound  indirectly to  the depletion  of the

state's treasury.  It follows that PRASA's assertion  of Eleventh

Amendment immunity in this case is severely flawed.

          2.  Other Factors.  Although PRASA's  inability to draw
          2.  Other Factors.
                           

on the public fisc  cripples its immunity defense, we turn to the

other  factors  mentioned  in the  case  law  in  order that  our

investigation may  be complete.   In the  circumstances at  hand,

                                12

these factors,  taken as an aggregate, corroborate  the view that

PRASA does not dwell within the Eleventh Amendment's shelter.

          To  be  sure,  the  two  pans  of  the  scale  are  not

completely  out  of balance.   PRASA  to  some extent  wields the

state's  power; after  all,  the enabling  legislation  describes

PRASA's mission to provide water and sewer services as fulfilling

"an  essential government function."   P.R. Laws Ann.  tit. 22,  

142.   Additionally,  neither PRASA  nor  its revenue  bonds  are

taxable, see id.   155; PRASA enjoys the power of eminent domain,
                

see id.   144(e); and the  Governor of Puerto Rico appoints  five
       

of PRASA's seven board members, see id.   143.
                                       

          PRASA places  particular emphasis on the  fact that its

water   and  sewage   functions  are  governmental   rather  than

proprietary and insists that this circumstance renders  it an arm

of the  state.6  But the  nature of PRASA's function  is only one

                    

     6In arguing this point, PRASA leans heavily on  our decision
in  Puerto Rico Ports Auth. v.  M/V Manhattan Prince, 897 F.2d 1,
                                                    
12 (1st  Cir. 1990).   This reliance  is mislaid.   In  Manhattan
                                                                 
Prince,  the Ports Authority was  acting only as  the licensor of
      
harbor  pilots for whom it provided no  training and over whom it
exercised no assignment power.  The Authority derived no  revenue
from  the  licensing function.    Moreover,  the legislature  had
explicitly  made  Authority  members'  misfeasance  of  the  kind
alleged   in   Manhattan   Prince   attributable  only   to   the
                                 
Commonwealth.   See  P.R. Laws  Ann. tit.  23,    2303(b) (1987).
                   
PRASA's situation is much different; it charges for its services,
controls its total  operations, and answers  for its own  bevues.
Thus,  a more  apt  Ports Authority  analogy  is found  in  Royal
                                                                 
Caribbean Corp. v. Puerto Rico Ports Auth., 973 F.2d 8 (1st  Cir.
                                          
1992).   That case involved  not licensing, but  operation of the
ports.  See  id. at 9.  Because the  Ports Authority charged user
                
fees  that supported  the costs  of its  port operations  and was
relatively free of central  government control, we ruled  that it
did not  enjoy Eleventh Amendment  immunity with  respect to  its
management of the ports.  Id. at 12.
                             

                                13

part  of the equation, and, standing alone, it is insufficient to

bring PRASA behind the  Eleventh Amendment's shield.  Educational

services, for  example, are, like water  treatment, a traditional

governmental function.   Education, however, has  an even longer,

stronger  governmental  history  than  water  treatment,  and  as

attendance requirements attest, a  more entrenched place in state

government.  Yet, despite  these more evocative  characteristics,

school boards  are not immune from  suits in federal court.   See
                                                                 

Mt. Healthy, 429 U.S. at 280-81 (holding that school board is not
           

entitled to assert Eleventh Amendment immunity).

          On  the other  side of  the scale,  a heftier  array of

indicators  suggests that  PRASA is  distinct from  Puerto Rico's

central government.  PRASA  has the power to raise  funds through

user fees  (which, significantly,  the Commonwealth, as  a water-

and-sewer  user, must  pay with  respect to its  own operations).

See P.R. Laws Ann.  tit. 22,   158.  PRASA also  has the right to
   

raise funds by issuing revenue bonds independently of the central

government.   See  id.     152.   The  power and  opportunity  to
                      

generate  a  revenue  stream  and  thereby  finance  an  agency's

operations  is an  important attribute  of the  agency's separate

identity.   Cf. Hernandez-Tirado v. Artau, 874 F.2d 866, 872 (1st
                                         

                    

          We  recognize the  seeming anomaly  in a  single agency
being  held  to  possess  Eleventh Amendment  immunity  for  some
functions but not for others.  However, the two cases cited above
turned on the nature  of the function involved in  each instance,
presumably  because, in  light  of the  Authority's portfolio  of
diverse operations, the question  of access to the Commonwealth's
treasury  was fuliginous.  The  case before us  is free from this
strain of uncertainty.

                                14

Cir.  1989)  (finding agency  to be  an  arm of  the Commonwealth

because  the central government had the sole power to raise money

for the agency).   Moreover, bondholders must look only  to PRASA

for recompense in the event of default.  See P.R.  Laws Ann. tit.
                                            

22,   152(I).  Then, too, PRASA is separately incorporated as "an

autonomous  government instrumentality."  Id.   142.  It may sue,
                                             

be  sued,   and  enter   contracts  without  the   Commonwealth's

particular permission.   See id.    144(c),  (d).  Its  funds are
                                

kept entirely separate  from the funds of  the central government

and are totally  controlled by its own  board.  Last,  but surely

not least, the Commonwealth  has explicitly insulated itself from

any financial responsibility with respect to PRASA's general debt

and ordinary bonded indebtedness.7  See id.   144.
                                           

          One more item deserves mention.   Whether an agency  is

an  arm of the state  vel non is a matter  of federal, not local,
                             

law.   See Blake, 612 F.2d  at 722.  Nevertheless,  it is notable
                

that the district court's  view of PRASA as a  separate political

subdivision  rather than  as  a part  of  the central  government

comports with that of Puerto Rico's highest tribunal.  The Puerto

Rico Supreme Court  has consistently concluded that  PRASA is not

an alter ego  of the central government.  The court observed over

                    

     7PRASA  argues that  because  its  generated revenues  (bond
monies  and  user  fees)  are  "pledged"  to  current  debts  and
projects,  it  will  have no  money  to  pay a  judgment  and any
judgment  creditor  must,  therefore, look  to  the Commonwealth.
This  is specious reasoning.   If M&E prevails  in this suit, it,
like  unsecured judgment  creditors from  time immemorial,  would
bear  the risk that it might find few assets available to satisfy
the judgment.

                                15

forty years ago  that the  legislature intended PRASA  to "be  as

amenable to judicial  process as any private  enterprise would be

under like  circumstances . . .  ."  Arraiza v.  Reyes, 70 P.R.R.
                                                      

583,  587 (1949).  More recently, the court reiterated that PRASA

has  a  "personality  separate  and   apart  from  that  of   the

government,"     and  does  not  have   the  "sovereign  immunity

traditionally enjoyed by the  State."  Canchani v.  C.R.U.V., 105
                                                            

P.R. Dec.  352, 489  n.2, 490  (1976); see  also A.A.A.  v. Union
                                                                 

Empleados A.A.A.,  105 P.R.  Dec. 605,  628 (1976)  (stating that
                

PRASA  is  "unquestionably  framed  as a  private  enterprise  or

business  and in fact operates as such").  While not dispositive,

consistent  decisions of  a state's  highest court  construing an

agency's   or   institution's  relationship   with   the  central

government  are important  guideposts  in a  reasoned attempt  to

locate the agency's or  institution's place within the scheme  of

things.  See Ainsworth Aristocrat, 818 F.2d at 1037.
                                 

          3.   Assessing the Balance.   The upshot  is that PRASA
          3.   Assessing the Balance.
                                    

lacks eligibility  for  Eleventh Amendment  immunity  on  several

levels.  First, and most fundamentally, PRASA's inability to  tap

the Commonwealth  treasury or  pledge  the Commonwealth's  credit

leaves it  unable to exercise  the power of  the purse.   On this

basis, PRASA is ill-deserving of Eleventh Amendment protection.

          Even putting  aside PRASA's fiscal separation  from the

central government, we find  that the sum total of  the secondary

factors preponderates against immunity.  While PRASA indisputably

operates with some quantum  of state authority, as do  many other

                                16

public  utilities,  it is  readily  apparent  that Puerto  Rico's

legislature  chose  to  structure  an  arm's-length  relationship

between  PRASA and  the  central government.   To  implement this

relationship,  the  legislature gave  PRASA  the  power to  raise

funds,  enter contracts, conceive  strategy, and to  make its own

operational  decisions.   As  a  consequence  of the  legislative

design, the central  government does business  with PRASA in  the

same manner as with other  vendors:  it pays for the  services it

receives  and  does not  extend  any  credit or  generic  funding

guarantees.    When all  the  relevant factors  are  weighed, the

indicia of separateness countervail the indicia of togetherness.

                               III.
                                   

                            Conclusion
                                      

          We  need go no further.  The profound impact of PRASA's

inability  to  reach   the  Commonwealth's   treasury,  and   our

calibrating  measurement of the  secondary factors,  dictate that

PRASA's assertion of immunity must fail.  Consequently, we  today

confirm the suspicions adumbrated in Howard, 744 F.2d at 886:  in
                                           

its  current  incarnation, the  Puerto  Rico  Aqueduct and  Sewer

Authority is  not safeguarded from federal  court jurisdiction by

the Eleventh  Amendment.  Therefore, the  district court's denial

of PRASA's motion to dismiss must be

Affirmed.
        

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