Court Opinion

ID: 15147
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:42:17+00
Date Added: 2024-06-11T15:04:26.560270
License: Public Domain

UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT

                     _______________________

                           No. 96-50830
                     _______________________

In The Matter of: TEJAS TESTING TECHNOLOGY ONE;
TEJAS TESTING TECHNOLOGY TWO,
                                                          Debtors,

                  ______________________________

SOUTHEAST REGION OPERATING CONTRACTORS; MUBARAK ALI ASHARIA; ALICO
BUSINESS, INC.; GENE A. DRAKE; KARTEST, INC.; HOUSTON FRAZIER;
HOULUE AIR, INCORPORATED; RICHARD GRAYSON; EMTEX CORPORATION; DAVID
HARRIS; ENVIRONMENTAL TESTING, INC.; ANTHONY JEAN; FUTURE AIR,
INC.; MARTHA KAPLAN; CHRISAIR CORPORATION; ROBERT LEE; ZAPOTEC,
INC.; JACOB MATHEW; DISNEY TESTING, INC.; WILMER J. MOORE; WESTSIDE
AUTO EMISSIONS TESTING, INC.; RICHARD MORENO, RHRM, INC.; ALVIN W.
PHILLIPS; TEXAS EMISSION SYSTEM TESTING, INC.; PEGGY ROARK; R & R
INTERESTS, INC.; M. S. SAFADI; ZODIAC ENTERPRISES AND INVESTMENT,
INC.; MARK SHERRILL; NO ZONE ENTERPRISES, INC.; YU-TSAI WEI; EARTH
AIRCARE, INC.; CLAUDIA WILSON; OLD BLUE, INC.; OPERATING
CONTRACTORS; ABS EMISSIONS, INC; AMVI ENTERPRISES, INC.; BTM, INC.;
CARRELL MANAGEMENT SERVICES, INC.; CLEAN HORSE, INC.; CRICKETT I,
LLC; CRICKETT II, LLC; CRR, INC.; DIVERSIFIED GROUP, INC.; ECOTEST
LTD., INC.; EMISSIONS CHECKS, INC.; EMISSIONS, LLC; EMISSIONS II,
LLC; GATE KEEPER, INC.; HUNGRY HORSE ENTERPRISES, LTD., CO.;
MCNEILL ENTERPRISES, INC.; NORMANDALE EMISSIONS CERTIFICATE CENTER,
INC.; RDR ENTERPRISES, INC; RHUBARB MANAGEMENT, INC.; TEJAS OAK
CLIFF, LLC; TEXAS CLEAN AIR CORPORATION; GREEN ENVIRONMENTAL
MANAGEMENT, INC.; HARBLACON TESTING, INC.; KLA SERVICES, INC.; THE
WILLIAM H. WALLACE CO.; J T J T JABB, LLC; JOHN JOHN PEREX, JR.,
INC., JR.,
                                                         Appellees,

                                v.

BARRY MCBEE; RALPH MARQUEZ; JOHN H. BAKER; DAN PEARSON; JAMES R.
WILSON; WILLIAM G. BURNETT; DAN MORALES, Attorney General,

                                                       Appellants.
_________________________________________________________________

           Appeal from the United States District Court
                 for the Western District of Texas
                            (A-96-CV-70)
_________________________________________________________________

                                      June 26, 1998

Before JONES, STEWART, and DENNIS, Circuit Judges.

EDITH H. JONES, Circuit Judge:*

               Several       operating     contractors        involved      with   Texas’s

former vehicle emissions testing program sued the state and various

state officials on a plethora of claims after the Texas legislature

discontinued the program. The defendants moved to dismiss the case

on the ground of Eleventh Amendment immunity.                       The district court

denied the motion to dismiss, and the defendants appealed.                              We

affirm in part, reverse in part, and remand.

                                     I.    Background

                                          A.   Facts

               Between 1991 and 1995, the State of Texas acted to

implement          a    vehicle     emissions       testing       program    in    certain

metropolitan areas of the state.                    In 1993, the state contracted

with       Tejas       Testing    Technology       One,   L.C.,    and   Tejas     Testing

Technology Two, L.C., (collectively “Tejas”) to operate the testing

program. In 1995, however, the state canceled the program with the

passage of S.B. 178.              Tejas then sued the Texas Natural Resources

Conservation Commission (“TNRCC”) and various state officials in

       *
       Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

                                               2
their official capacity (“State Officials”)1 (collectively “State”)

in state court for breach of contract and numerous other state and

federal causes of action.             Shortly thereafter, Tejas declared

bankruptcy.       The    case   was   removed    to    bankruptcy     court   and

subsequently    transferred     to    federal    district    court    after   the

reference   was    withdrawn.         During    this   time,    the   operating

contractors,2     with   whom   Tejas    had    contracted     to   operate   its

emissions testing centers, intervened as plaintiffs against the

State.

            The State subsequently filed motions to dismiss Tejas’s

and the operating contractors’ complaints, asserting its Eleventh

Amendment immunity. In particular, the State Officials argued that

although the two complaints couched their requests for relief in

the form of prospective declaratory and injunctive relief under Ex

parte Young, the real nature of the relief sought was retroactive

money damages for breach of contract——a suit barred by the Eleventh

Amendment. The State Officials contended that Ex parte Young could

not apply unless Tejas and the operating contractors could identify

some form of prospective relief that would be meaningful to them.

The district court denied the motions to dismiss.

    1
        The state officials were the three TNRCC commissioners, the
executive director of the TNRCC, the director of the Texas
Department of Public Safety, the director of the Texas Department
of Transportation, and the attorney general.
      2
          The operating contractors are collectively identified in
two groups: (1) the Southeast Region Operating Contractors, and (2)
the Operating Contractors.

                                        3
            Tejas eventually settled its dispute with the State.        As

a consequence, the appeal now before this court concerns only the

State Officials and the operating contractors.         The precise issue

we address is the propriety of the district court’s denial of the

motion to dismiss the operating contractors’ complaint as it

pertains specifically to the State Officials.

              B.   Operating Contractors’ Causes of Action3

            The operating contractors assert the following causes of

action    against    the   State   Officials   in   their   First   Amended

Complaint.4    Each cause of action is followed by the nature of the

relief sought.

     1.   breach of contract against TNRCC (money damages)
     2.   third party beneficiary claim against TNRCC (money
          damages)
     Declaratory relief that S.B. 178:
          3.   violates the Texas Constitution because it is a
               “special law” (declaratory relief)

    3
       Before the State filed its motion to dismiss, the operating
contractors’ complaint contained only state law claims. After the
State filed its motion to dismiss, the operating contractors filed
their “First Amended Complaint” to add numerous federal claims.
Although the district court did not directly address the operating
contractors’ First Amended Complaint (and thus the operating
contractors’ federal claims) in denying the State’s motion to
dismiss, the district court did directly address the substance of
the operating contractors’ federal claims, because the exact same
claims were contained in Tejas’s complaint. Because the district
court addressed the applicability of the Eleventh Amendment to
every claim made by the operating contractors——although sometimes
in the context of Tejas——it is unnecessary to remand the case to
the district court for further consideration.
     4
       The number assigned to the summary of each cause of action
in this section is identical to the number assigned to that cause
of action in the operating contractors’ First Amended Complaint.
For simplicity, this opinion will refer to each cause of action by
number throughout.

                                      4
           4.   is an unconstitutional bill of attainder under both
                the Texas and U.S. Constitutions (declaratory
                relief)
           5.   is an unconstitutional impairment of contract under
                both the Texas and U.S. Constitutions (declaratory
                relief)
           6.   is an unconstitutional retroactive law under the
                Texas Constitution, which gives rise to a § 1981
                claim against the State (no request for specific
                relief)
           7.   violates the operating contractors’ civil rights
                under the Texas and U.S. Constitutions by impairing
                their contract rights (money damages, declaratory
                relief, and injunctive relief)
           8.   is an unconstitutional taking under the Texas and
                U.S. Constitutions (money damages and declaratory
                relief)
           9.   violates   the   Commerce   Clause   of   the   U.S.
                Constitution (declaratory and injunctive relief)
           10. violates    the  Supremacy    Clause   of   the  U.S.
                Constitution (declaratory and injunctive relief)
     11.   § 1983 action for deprivation of federal rights (money
           damages and injunctive relief)
     12.   declaration that the operating contractors’ further
           performance is excused based on the State’s conduct to
           date (declaratory relief)
     13.   declaration that the illegality of the State’s action in
           enacting S.B. 178 does not excuse performance by the
           TNRCC and the State Officials under the emissions
           contracts (declaratory relief)
     14.   declaration that S.B. 178 is void because of its
           constitutional infirmities (money damages and declaratory
           relief)

                             II.   Analysis

                A.   Jurisdiction & Standard of Review

           This court has jurisdiction to consider an interlocutory

appeal from the denial of a motion to dismiss based upon Eleventh

Amendment immunity.     See Puerto Rico Aqueduct & Sewer Auth. v.

Metcalf & Eddy, Inc., 113 S. Ct. 684 (1993); Earles v. State Board

of Certified Public Accountants, 139 F.3d 1033, 1036 (5th Cir.

1988).   We review a district court’s denial of a motion to dismiss

de novo, accepting all of the facts asserted in the plaintiff’s

                                    5
complaint as true.       See Jackson v. City of Beaumont Police Dep’t,

958 F.2d 616, 618 (5th Cir. 1992).                   The motion may be granted

“‘only if it appears that no relief could be granted under any set

of facts that could be proven consistent with the allegations.’”

Id. (quoting Baton Rouge Bldg. & Constr. Trades Council v. Jacobs

Constructors, Inc., 804 F.2d 879, 881 (5th Cir. 1986)).

                              B.   Ex parte Young

             “Young    established        the    principle     that     the   Eleventh

Amendment does not bar a suit in federal court against a state

official to enjoin his enforcement of a state law alleged to be

unconstitutional.”       American Bank & Trust Co. v. Dent, 982 F.2d
917, 920 (5th Cir. 1993).            The Ex parte Young doctrine “ensures

that state officials do not employ the Eleventh Amendment as a

means of avoiding compliance with federal law.”                          Puerto Rico

Aqueduct, 113 S. Ct. at 688; see also 17 CHARLES ALAN WRIGHT,                    ET AL.,

FEDERAL PRACTICE & PROCEDURE § 4232 (2d ed. 1988 & Supp. 1998).

However, Young “does not foreclose an Eleventh Amendment challenge

where the official action is asserted to be illegal as a matter of

state law alone.”       Papasan v. Allain, 106 S. Ct. 2932, 2940 (1986)

(citing Pennhurst State Sch. & Hosp. v. Halderman, 104 S. Ct. 900,

910-11     (1984)).     “In   such    a    case,     federal    supremacy      is   not

implicated because the state official is acting contrary to state

law only.”     Id.    Therefore, “Young and Edelman are inapplicable in

a   suit   against    state   officials         on   the   basis   of    state    law.”

Pennhurst, 104 S. Ct. at 911.

                                           6
            In addition, “Young cannot be extended to permit a suit

for equitable monetary restitution from the state treasury for a

past breach of a legal duty . . . .”          American Bank & Trust Co.,
982 F.2d at 920 (citing Edelman v. Jordan, 94 S. Ct. 1347, 1355-60

(1974)).    Rather, Young permits only prospective injunctive or

declaratory relief. See id. (citing Pennhurst, 104 S. Ct. at 909);

see also Saltz v. Tennessee Dep’t of Employment Sec., 976 F.2d 966,

968 (5th Cir. 1992) (stating that for Ex parte Young to apply, the

“suit must be brought against individual persons in their official

capacities as agents of the state and the relief sought must be

declaratory or injunctive in nature and prospective in effect”).

                           (1)   State-law Claims

            The operating contractors’ cause of action No. 3 deals

solely with an issue of state law.            Therefore, it cannot fall

within Ex parte Young.      This cause of action is dismissed pursuant

to the Eleventh Amendment.

            The operating contractors’ causes of action Nos. 4, 5, 6,

7, and 8 deal, in part, with whether S.B. 178 is unconstitutional

under certain provisions of the Texas Constitution.           To the extent

that these causes of action turn on issues of state law alone,

they cannot fall within Ex parte Young and are dismissed pursuant

to the Eleventh Amendment.

                     (2)    Nature of Relief Sought

            The issue before this court on the operating contractors’

remaining   causes   of    action   is    whether   the   relief   sought   is

declaratory or injunctive in nature and prospective in effect, or

                                      7
whether——when all of the operating contractors’ imprecise pleading

language is removed to reveal the real nature of this case——the

relief sought is essentially retroactive monetary damages.       The

Supreme Court, in addressing a similar inquiry, has stated:

     Consequently, Young has been focused on cases in which a
     violation of federal law by a state official is ongoing
     as opposed to cases in which federal law has been
     violated at one time or over a period of time in the
     past, as well as on cases in which the relief against the
     state official directly ends the violation of federal law
     as opposed to cases in which that relief is intended
     indirectly to encourage compliance with federal law
     through deterrence or directly to meet third-party
     interests such as compensation.      As we have noted:
     “Remedies designed to end a continuing violation of
     federal law are necessary to vindicate the federal
     interest in assuring the supremacy of that law.       But
     compensatory or deterrence interests are insufficient to
     overcome the dictates of the Eleventh Amendment.”

          Relief that in essence serves to compensate a party
     injured in the past by an action of a state official in
     his official capacity that was illegal under federal law
     is barred even when the state official is the named
     defendant.   This is true if the relief is expressly
     denominated as damages. It is also true if the relief is
     tantamount to an award of damages for a past violation of
     federal law, even though styled as something else. On
     the other hand, relief that serves directly to bring an
     end to a present violation of federal law is not barred
     by the Eleventh Amendment even though accompanied by a
     substantial ancillary effect on the state treasury.

Papasan, 106 S. Ct. at 2940 (internal citations and footnotes

omitted).   The Court went on to state:

          For Eleventh Amendment purposes, the line between
     permitted and prohibited suits will often be indistinct:
     “[T]he difference between the type of relief barred by
     the Eleventh Amendment and that permitted under Ex parte
     Young will not in many instances be that between day and
     night.”   In discerning on which side of the line a
     particular case falls, we look to the substance rather
     than to the form of the relief sought, and will be guided
     by the policies underlying the decision in Ex parte
     Young.

                                 8
Id. at 2940-41 (internal citations omitted).             The State Officials’

assertion that injunctive relief is impracticable, and therefore a

pleading ruse, because the operating contractors cannot possibly

perform the contract, is unpersuasive at this point.               The argument

depends on facts outside the pleadings for purposes of the motion

to dismiss.

                  The operating contractors’ causes of action Nos. 1 and 2

deal with breach of contract and third-party beneficiary claims.

These       two     causes   of   action   are   straightforward   claims   for

retroactive monetary damages for the breach of a past legal duty.

As such, if directed at the State Officials, they do not fall

within Ex parte Young and should be dismissed.              However, because

causes of action Nos. 1 and 2 are expressly framed against only the

TNRCC, we do not reach this issue.

                  To the extent that the operating contractors’ causes of

action Nos. 8 and 11 seek retroactive monetary damages, they are

dismissed pursuant to the Eleventh Amendment.

                  Finally, the operating contractors’ causes of action Nos.

4 to 14 all seek, at least on their face, prospective declaratory

or injunctive relief for a continuing violation of federal law.5

Whether there is any merit to these claims is far from clear, if

for no other reason than it appears doubtful whether there exists

a contractual relationship between the operating contractors and

the State of Texas.            More importantly, whether these claims are

        5
          To the extent that this opinion has already addressed
causes of action Nos. 4, 5, 6, 7, 8, and 11, the following part of
this opinion does not apply to them.

                                           9
truly    for   prospective      declaratory         or   injunctive       relief   is

uncertain.     The State Officials argue that there is no meaningful

declaratory      or    injunctive     relief   available     to    the     operating

contractors      and    that   this    suit    is    essentially      a    suit    for

retroactive money damages disguised in a carefully worded complaint

giving the appearance of an Ex parte Young action.                 If this turns

out to be true upon remand and further proceedings in the district

court, these causes of action should be dismissed pursuant to the

Eleventh Amendment.        A suit for retroactive money damages against

a state official in his official capacity is barred by the Eleventh

Amendment and does not fall within the Ex parte Young exception.

However,   for    the    present    purpose    of    determining      whether      the

district court properly denied the State Officials’ motion to

dismiss, the operating contractors have stated in causes of action

Nos. 4 to 14 claims that -- on their face -- fall within Ex parte

Young.     To the extent that these causes of action are claims

against individual state officials for prospective declaratory and

injunctive relief in the face of a Texas law (S.B. 178) alleged to

be a continuing violation of federal law, they are not barred by

the Eleventh Amendment. See Idaho v. Coeur d’Alene Tribe of Idaho,

117 S. Ct. 2028, 2040 (1997) (“An allegation of an on-going

violation of federal law where the requested relief is prospective

is ordinarily sufficient to invoke the Young fiction.”).                     In sum,

at this stage, it does not appear that no relief could be granted

to the operating contractors under any set of facts that could be

                                        10
proven consistent with the allegations contained in their First

Amended Complaint.6

                         III.   Conclusion

          For the foregoing reasons, the district court is REVERSED

in part, AFFIRMED in part, and this case is REMANDED for further

proceedings consistent with this opinion.

     6
         Declaratory or injunctive relief on remand, of course, is
far from certain. “[A] plaintiff who has brought his case within
the Young doctrine must still overcome the other statutory and
court-made barriers to such injunctions, and he must meet the usual
equitable requirements for an injunction. ‘[N]o injunction ought
to issue against officers of a State clothed with authority to
enforce the law in question, unless in a case reasonably free from
doubt and when necessary to prevent great and irreparable injury.’”
17 WRIGHT ET AL., supra, § 4232, at 569 (internal footnote omitted)
(citing Massachusetts State Grange v. Benton, 47 S. Ct. 189, 190
(1926)).

                                 11