Court Opinion

ID: 933620
Source: CourtListenerOpinion
Date Created: 2013-06-26 19:18:08.379414+00
Date Added: 2024-06-11T15:25:30.742946
License: Public Domain

PUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                              No. 12-1480

CARPENTERS PENSION FUND OF BALTIMORE, MARYLAND, by its
Trustee, Augustus L. Lester; MID−ATLANTIC REGIONAL COUNCIL
OF CARPENTERS HEALTH AND WELFARE FUND, by its Trustee,
Augustus L. Lester; MID−ATLANTIC REGIONAL COUNCIL OF
CARPENTERS SEVERANCE AND ANNUITY FUND, by its Trustee,
Augustus L. Lester; MID−ATLANTIC REGIONAL COUNCIL OF
CARPENTERS, BALTIMORE DISTRICT; CARPENTERS VACATION FUND OF
BALTIMORE, MARYLAND, by its Trustee, Augustus L. Lester;
BALTIMORE CARPENTERS' JOINT APPRENTICESHIP AND TRAINING
COMMITTEE, by its Trustee, Augustus L. Lester,

                 Plaintiffs – Appellees,

           v.

MARYLAND DEPARTMENT OF HEALTH AND MENTAL HYGIENE,

                 Garnishee – Appellant,

           and

TAO CONSTRUCTION COMPANY, INC.,

                 Defendant,

WACHOVIA BANK,

                 Garnishee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.    Benson Everett Legg, Senior District
Judge. (1:07-cv-01414-BEL)

Argued:   March 22, 2013                    Decided:   June 26, 2013
Before DUNCAN and DIAZ, Circuit Judges, and HAMILTON, Senior
Circuit Judge.

Reversed and remanded by published opinion. Judge Diaz wrote
the opinion, in which Judge Duncan and Senior Judge Hamilton
joined.

ARGUED: William F. Brockman, OFFICE OF THE ATTORNEY GENERAL OF
MARYLAND, Baltimore, Maryland, for Appellant.   Brian G. Esders,
ABATO, RUBENSTEIN & ABATO, PA, Baltimore, Maryland, for
Appellees.   ON BRIEF: Douglas F. Gansler, Attorney General of
Maryland, Baltimore, Maryland, for Appellant.        Kimberly L.
Bradley, ABATO, RUBENSTEIN & ABATO, PA, Baltimore, Maryland, for
Appellees.

                               2
DIAZ, Circuit Judge:

       We       consider      whether   the       jurisdictional     shield   of     the

Eleventh Amendment 1 insulates a state from a writ of garnishment

under Federal Rule of Civil Procedure 69(a).                     Carpenters Pension

Fund       of   Baltimore,      Maryland,     and    co-plaintiffs      (collectively

“the       Fund”)     filed     this    garnishment        proceeding    against     the

Maryland         Department       of    Health       and    Mental      Hygiene    (the

“Department”) to collect monies owed to a debtor construction

company.         The Department moved to quash the writ of garnishment

on grounds of sovereign immunity and Maryland public policy.

The district court denied the motion, and the Department filed

this interlocutory appeal.

       We conclude that a federal proceeding that seeks to attach

the property of a state to satisfy a debt, whether styled as a

garnishment action or an analogous common law writ, violates the

Eleventh Amendment.             As the Department is immune from suit, we

reverse         and   remand    with    instructions       to   quash   the   writ   of

garnishment.

       1
       While this appeal nominally arises under the Eleventh
Amendment, we note “that the sovereign immunity enjoyed by the
States extends beyond the literal text of the Eleventh
Amendment,” Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S.
743, 754 (2002), deriving from the common law immunity that the
states possessed before ratification and which the Constitution
should merely be seen “as evidencing and exemplifying,” Alden v.
Maine, 527 U.S. 706, 728 (1999).

                                              3
                                                  I.

        The     instant      litigation             originates          from        an   Employee

Retirement Income Security Act action filed by the Fund in May

2007, against Tao Construction Company, Inc. (“Tao”) alleging

deficient employer contributions.                        When Tao failed to answer the

summons,        the     district       court           entered    a     $16,140.64        default

judgment for the Fund.

        In an effort to collect the judgment, the Fund filed an

enforcement         action       in    the    federal          district        court     for   the

District      of      Maryland.        After       failed        attempts      to    locate     any

assets owned by Tao, the Fund discovered that Tao’s CEO had

contracted         with    the    Department            to    perform    construction          work

under     the      trade     name      “Pharoah          Building       and     Construction.”

Finding sufficient evidence that Pharoah was indeed the alter

ego of Tao, the district court issued a writ of garnishment

against the Department for amounts due ($9,963.52) to “Tao d/b/a

Pharoah Building and Construction.”                          J.A. 41.

     The      Department         moved       to    quash       the    writ     on    grounds     of

sovereign immunity and Maryland public policy.                               In a preliminary

memorandum opinion and order, the district court concluded that

sovereign       immunity         did   not        apply       because    by     providing       for

immunity from suit only under a public policy doctrine, Maryland

had implicitly waived its sovereign immunity under the Eleventh

Amendment.          The court further concluded that Maryland public

                                                   4
policy    did     not    foreclose       the       garnishment       action      because   it

sought “wages” rather than property.                       Nevertheless, the court

deferred      a    final      ruling      on        the   Department’s            motion   in

anticipation of a joint status report regarding disputes about

the payment obligations of the underlying contract.

      The court subsequently held a hearing, during which the

Department renewed its Eleventh Amendment objection.                               The court

reaffirmed its conclusion that sovereign immunity did not bar

the   writ,     but     on   different     grounds.            It   concluded      that    the

garnishment       action     was   not    a    “suit”     against        a     state   entity,

noting that although the garnishment action resembled a suit in

the   procedural        sense,     in    substance        it    was      not    because    the

Department was not a real party in interest--but rather a “mere

custodian” of the contract sums.                      J.A. 99.           Accordingly, the

court denied the Department’s motion to quash.

      We have jurisdiction 2 under the collateral order doctrine to

review    this    interlocutory          order      inasmuch        as   it    involves    the

      2
       We deferred action on the Fund’s motion to dismiss for
lack of subject matter jurisdiction pending arguments. We now
deny that motion.

     We do, however, agree with the Fund that we lack appellate
jurisdiction to consider whether Maryland “public policy”
supplies an independent basis for quashing the writ.        The
district court’s analysis on that issue in its preliminary
memorandum was advisory, as the court postponed its ruling on
the Department’s motion until its final order. The final order
(Continued)
                                               5
denial of an immunity from suit.                         See P.R. Aqueduct & Sewer

Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144-46 (1993).

                                                II.

                                                A.

       We review the denial of sovereign immunity de novo.                                 S.C.

Wildlife Fed’n v. Limehouse, 549 F.3d 324, 332 (4th Cir. 2008).

       “[T]he States’ immunity from suit is a fundamental aspect

of     the    sovereignty          which      the      States        enjoyed    before     the

ratification        of    the     Constitution.”           Alden, 527 U.S.   at   713.

Because that protection inheres with the constitutional notion

of sovereignty that the states retained, Seminole Tribe of Fla.

v.   Florida,       517 U.S. 44,     54    (1996),       it    “extends    beyond    the

literal text of the Eleventh Amendment,”                            Fed. Mar. Comm’n, 535
U.S. at 754, to any “suit” that “subject[s] a State to the

coercive      process      of     judicial       tribunals,”         Seminole    Tribe, 517
U.S.    at    58.         Thus,    we    consider       here        whether    “the   federal

judicial      action      must     fairly       be    deemed    a    ‘suit’”    against    the

state.       In re NVR, LP, 189 F.3d 442, 450 (4th Cir. 1999).

       In    a   case     testing       the     Supreme    Court’s       jurisdiction       to

review state court criminal judgments in which the state is a

in this case addressed only the Eleventh Amendment question,
which is the sole issue before us.

                                                 6
party, Chief Justice Marshall remarked: “What is a suit?                  We

understand it to be the prosecution, or pursuit, of some claim,

demand, or request.”           Cohens v. Virginia, 19 U.S. (6 Wheat.)

264,   407   (1821).     The    Supreme   Court   has   scarcely   elaborated

since, stating only that a “suit” is to be determined “‘by the

essential nature and effect of the proceeding.’” Idaho v. Coeur

d’Alene Tribe, 521 U.S. 261, 277 (1997) (quoting In re State of

New York, 256 U.S. 490, 500 (1921)).

       For our part, we have outlined a more technical analysis

based on “both the procedural posture and substantive nature of

the proceeding.”       In re NVR, 189 F.3d at 450.         And although our

decision in In re NVR likely does not survive Central Virginia

Community College v. Katz, 546 U.S. 356 (2006), 3 we believe its

general test for determining a “suit”--which the Supreme Court

did not disturb--is nonetheless instructive.                Accordingly, we

examine whether the procedural means and substantive end of the

instant writ of garnishment involve the compulsory exercise of

       3
        In Katz, the Supreme Court held that the Eleventh
Amendment has limited application in the arena of federal
bankruptcy jurisdiction, for the Bankruptcy Clause, U.S. Const.
art. I, § 8, cl. 4, represented a partial cession by the states
of their sovereign immunity.     See Katz, 546 U.S. at 373.
Accordingly, it is doubtful that In re NVR, which applied the
Eleventh Amendment to a bankruptcy reorganization that sought
refunds of exempted taxes paid to Maryland and Pennsylvania,
remains viable.

                                      7
federal jurisdiction over the state of Maryland.                                   See In re NVR,
189 F.3d at 450, 452-53.

       The procedural inquiry compares the process of the legal

action to that of a typical suit, see Fed. Mar. Comm’n, 535 U.S.

at 756-59 (comparing putative “suit” to “civil litigation”), but

principally as a measure of “the degree of coercion exercised by

the federal court in compelling the state to attend,” In re NVR,
189 F.3d at 452.            For a suit qua “suit” involves “[t]he specific

indignity         against       which     sovereign          immunity         protects[:]           the

insult       to     a   State    of     being       haled     into          court    without       its

consent.”          Va. Office for Prot. & Advocacy v. Stewart, 131 S.

Ct. 1632, 1640 (2011).

       The        substantive      inquiry           asks     whether          the        proceeding

“demand[s]         something      [from       the    state]       by    the     institution          of

process in a Court of justice,” Cohens, 19 U.S. (6 Wheat.) at

408,    and       “[t]he    demand      for    money       from    a    state        is    a    strong

indication          that   a    federal       judicial        proceeding            is     indeed    a

‘suit’” as a substantive matter.                       In re NVR, 189 F.3d at 454;

see    also       Coeur    d’Alene      Tribe, 521 U.S.       at    277    (“[W]hen        the

action is in essence one for the recovery of money from the

state,        the       state     is     the         real,        substantial             party     in

interest . . . .”).                Where       relief        is     premised          on       federal

jurisdiction over the state, as opposed to where the state is

merely an adjunct to a dispute that “collaterally affects” its

                                                 8
interests, 4 id., the proceeding is a suit in the substantive

sense.

                                          B.

       We now apply these principles to the instant proceeding,

which is a federal enforcement action by the Fund under Federal

Rule       of   Civil   Procedure   69    to   execute   their   legal   judgment

against Tao.        The law of the forum state governs such ancillary

proceedings.        See Fed. R. Civ. P. 69.         As a result, the district

court in this case issued a writ of garnishment, which is a

valid procedural device in Maryland for enforcing a judgment.

See Parkville Fed. Sav. Bank v. Md. Nat’l Bank, 681 A.2d 521,

524 (Md. 1996) (“A writ of garnishment is a means of enforcing a

judgment.         It allows a judgment creditor to recover property

owned by the debtor but held by a third party.”).

       We begin by noting that procedurally this action resembles

a   conventional        “suit.”     The   garnishment    proceeding      commences

upon the issuance of a writ, see Md. R. 2-645(b)-(c), at which

point the garnishee must file an answer admitting or denying

indebtedness and asserting any applicable defenses “within the

       4
       An example is a purely in rem proceeding in which “the
state is not in possession of the property.”      Tenn. Student
Assistance Corp. v. Hood, 541 U.S. 440, 446-50 (2004). In this
context, “jurisdiction is premised on the res, not on the
persona” of the states, Hood, 541 U.S. at 450, while the remedy
does not involve recovery from the state treasury, Cf. In re
NVR, 189 F.3d at 453-54.

                                           9
time    provided     by    Rule   2-321”--a      period   which      coincides         with

answering a complaint in a civil action.                      See Md. R. 2-645(e).

If the garnishee timely answers and the creditor timely replies,

“the    matter   shall     proceed    as   if    it    were    an   original      action

between the judgment creditor as plaintiff and the garnishee as

defendant and shall be governed by the rules applicable to civil

actions.”     Md. R. 2-645(g).

       It is therefore not surprising that Maryland courts have

designated garnishment actions as “separate cases, even though

filed    in   the    underlying      action.”         Mayor    &    City    Council     of

Baltimore v. Utica Mut. Ins. Co., 802 A.2d 1070, 1083 (Md. Ct.

Spec. App. 2002).           In fact, the Maryland Court of Appeals has

“established        that   garnishment     is,   in    essence,      a     suit   by    the

debtor against the garnishee for the use and benefit of the

attaching creditor, and that the rights of the creditor against

the garnishee cannot rise above those of the debtor.”                         Peninsula

Ins. Co. v. Houser, 238 A.2d 95, 97 (Md. 1968) (emphasis added).

       Perhaps most importantly, a garnishee who fails to file an

answer to the writ risks default judgment.                    See Md. R. 2-645(f).

As it is the compulsory aspect of one sovereign exerting its

jurisdiction over another that concerns the Eleventh Amendment,

see Alden, 527 U.S. at 749, a proceeding that encumbers the

property of a sovereign unless it participates certainly amounts

                                           10
to unconstitutional “coercion exercised by the federal court in

compelling the state to attend,” In re NVR, 189 F.3d at 452.

     The Fund’s service of the writ left the Department with two

options: (1) answer the writ and appear before the court to

assert its defenses, or (2) ignore the writ and have a default

judgment imposed against the state treasury.                         When a similar

ultimatum     was    present       in     Federal    Maritime       Commission,       the

Supreme Court stated: “To conclude that this choice does not

coerce a State to participate in an . . . adjudication would be

to blind ourselves to reality.” 535 U.S. at 763-64.

     The    Fund’s    claim    that       the     Department       has    admitted    its

indebtedness to Pharoah is immaterial.                      The Eleventh Amendment

is a matter of jurisdiction, not liability.                       See In re NVR, 189
F.3d at 452 (“The Eleventh Amendment, of course, does not free

Maryland    from     federal       law,    but     simply    the    jurisdiction          of

federal    courts.”).         It     is    the     mere     imposition     of     federal

jurisdiction    on    a   state,        thereby    offending      its    dignity     as    a

sovereign, that violates this constitutional protection.                              See

Fed. Mar. Comm’n, 535 U.S. at 769; Alden, 527 U.S. at 715.                           This

injury results “regardless of the relief sought,” Metcalf and

Eddy, 506 U.S. at 146, and regardless of whether the relief is

actually owed, see Automatic Sprinkler Corp. of Am. V. Darla

Env’t   Specialists       Inc.,     53 F.3d 181,    182    (7th    Cir.    1995)

(“Automatic     Sprinkler      believes           that     sovereign      immunity        is

                                           11
inapplicable        because      it    is    trying       to     collect      money     that      the

United States concededly owes to Darla.                              This does not cut much

ice.”).

       Accordingly, we conclude that this garnishment action is a

“suit”      in    the       procedural      sense.             The    state     is     the    named

garnishee,        the       adversarial       posture          of     the     action       “demands

affirmative action by Maryland,” In re NVR, 189 F.3d at 453, and

the action is indisputably premised on jurisdiction over the

sovereign.

       We    also       find    that        the    underlying             garnishment        action

satisfies        the    substantive         criteria           of    a    “suit”     because       it

demands recovery from the state treasury.                                See Gray v. Laws, 51
F.3d 426, 433 (4th Cir. 1995).                     From the outset of the Republic

a    sovereign      has      enjoyed     immunity         from        suits    to    attach       its

property, see The Schooner Exch. v. McFaddon, 11 U.S. (7 Cranch)

116 (1812) (attachment of foreign vessel), and this principle

applies equally to efforts to attach the funds of the sovereign

to satisfy the debt of another, see Mine Safety Appliances Co.

v. Forrestal, 326 U.S. 371, 375 (1945) (“In effect . . . this is

an   indirect       effort      to    collect      a     debt       allegedly       owed     by   the

government       in     a    proceeding      to        which    the       government       has    not

consented.”).

       As early as 1846, the Supreme Court rejected efforts by

creditors to garnish the wages of navy seamen from the federal

                                                  12
treasury.       Buchanan v. Alexander, 45 U.S. 20 (1845).                        The Court

acknowledged      that       the   disbursements         were    owed,       yet   applied

sovereign      immunity       to   prevent       the    disruption          on   government

functions that would attend the garnishment of public funds held

in the Treasury.        Id.

       Later in Federal Housing Administration, Region No. 4 v.

Burr, 309 U.S. 242, 245 (1940), the Supreme Court affirmed that

a    sovereign    is    immune     from   garnishment,           but     confronted     the

separate question of whether Congress waived that immunity in

the National Housing Act, 12 U.S.C. § 1702, by allowing the

Federal       Housing       Administrator        to    “sue     or     be    sued.”      In

determining “whether or not garnishment comes within the scope

of    that    authorization,”         Burr, 309 U.S.     at    244,      the   Court

concluded:

       Clearly the words ‘sue and be sued’ in their normal
       connotation embrace all civil process incident to the
       commencement or continuance of legal proceedings.
       Garnishment and attachment commonly are part and
       parcel of the process, provided by statute, for the
       collection  of   debts.    In   Michigan  a   writ  of
       garnishment is a civil process at law, in the nature
       of an equitable attachment.    But however it may be
       denominated, whether legal or equitable, and whenever
       it may be available, whether prior to or after final
       judgment, garnishment is a well-known remedy available
       to suitors.

Id. at 245-46 (emphasis added).                   The analysis in Burr mirrors

our    own.      If     a    waiver    from      “suit”       includes      post-judgment

                                            13
garnishment, then certainly the scope of immunity from “suit”

does as well.

       Recent         precedent    has       confirmed       that   “sovereign      immunity

bars       creditors        from   attaching         or     garnishing      funds   in    the

Treasury.”        Dep’t of Army v. Blue Fox, Inc., 525 U.S. 255, 264

(1999); see Franchise Tax Bd. of Cal. v. U.S. Postal Serv., 467
U.S. 512, 516-17 (1984) (“[U]nless waived, sovereign immunity

prevents        the    creditor . . . from            collecting      a    debt   through    a

judicial        order       requiring    the       United    States   to    garnishee     the

employee’s salary.”). 5                 And we implicitly endorsed this rule

when       we   noted       that   Congress         needed    to    legislatively        annul

federal sovereign immunity from garnishment.                          See Diaz v. Diaz,

586 F.2d 1061, 1063 (4th Cir. 1977) (“Indeed, it appears that

the    purpose        and    effect     of    42    U.S.C.    § 659   is    to    waive    the

sovereign immunity of the United States for garnishment and like

purposes in a limited class of State court actions . . . .”).

       Even though the relevant cases mostly concern the immunity

of the federal government from post-judgment attachment, we see

no reason why a state should not enjoy this immunity as well.

       5
       Our sister circuits have also affirmed this principle.
See Watters v. Wash. Metro. Area Transit Auth., 295 F.3d 36, 40
(D.C. Cir. 2002); Shaw v. United States, 213 F.3d 545, 548 (10th
Cir. 2000); Neukirchin v. Wood Cnty. Head Start, Inc., 53 F.3d
809, 812 (7th Cir. 1995); Ramsdell v. G.H. Coffey Co., 632 F.2d
162, 163 (1st Cir. 1980); May Dep’t Stores Co. v. Smith, 572
F.2d 1275, 1277 (8th Cir. 1978).

                                                14
State and federal immunity from suit are coextensive inasmuch as

both sovereigns derive their immunity from the same common law

heritage.        See Maxwell v. Cnty. of San Diego, 708 F.3d 1075,

1087-88 (9th Cir. 2013) (“Tribal sovereign immunity derives from

the same common law immunity principles that shape state and

federal sovereign immunity.”).

     Swimming against the current of this precedent, the Fund

can only repeat the reasoning of the district court that the

instant proceeding is not a suit because the Department is a

“mere custodian” for sums it admittedly owes to Pharoah. 6                    But

this characterization is true of all monies held in the state

treasury    in    the   sense    that   they   are   all   allocated   for   some

governmental purpose or obligation.

     At bottom, the Fund’s effort to distinguish the specific

money it requests from the rest of Maryland’s treasury is an

unsuccessful attempt to characterize its garnishment action as

an in rem proceeding.           But “[w]hile garnishment has been said to

be a proceeding in rem, it is not, strictly speaking, in rem.

It partakes both of the nature of a proceeding in personam and a

     6
       The principle precedent the Fund relies on for this
proposition is inapposite. In re Visiting Home Services did not
involve a writ of garnishment issued against a state in federal
court, but rather sought to enjoin a garnishment judgment that
had already been executed against a state agency in state court.
643 F.2d 1356, 1361 (9th Cir. 1981).

                                         15
proceeding in rem.”     38 C.J.S. Garnishment § 2; see also Shaffer

v. Heitner, 433 U.S. 186, 211 n.38 (1977) (“[G]arnishment or

foreign attachment is a proceeding quasi in rem.”).

     In this case, the garnishment proceeding has an in personam

character in that it requires jurisdiction over the sovereign

and its treasury.      And it is clear that “an action--otherwise

barred as an in personam action against the State--cannot be

maintained   through   seizure        of    property    owned      by   the   State.

Otherwise, the Eleventh Amendment could easily be circumvented;

an action for damages could be brought simply by first attaching

property that belonged to the State and then proceeding in rem.”

Fla. Dep’t of State v. Treasure Salvors, Inc., 458 U.S. 670, 699

(1982) (plurality).

     Regardless of how the Fund characterizes its claim in this

case,   it   is   ultimately    seeking          recovery   from    the   Maryland

treasury.     Accordingly,      the    Fund’s       post-judgment       garnishment

action is a suit in the substantive sense.

                                      III.

     As a matter of procedure and substance, the garnishment

proceeding   we   consider     here    is    a    “suit”    under   the   Eleventh

Amendment.    As a result, the Department is entitled to sovereign

                                       16
immunity.   We therefore reverse the district court’s order and

remand with instructions to quash the writ of garnishment.

                                            REVERSED AND REMANDED

                               17