Opinion
A3-02-121
February 25, 2003
MEMORANDUM AND ORDER
I. INTRODUCTION
Before the Court is defendant's, Wayne Stenehjem, in his capacity as the Attorney General of North Dakota ("AG"), motion to dismiss, or alternatively to stay further proceedings (doc. #3). The Attorney General moves to dismiss the declaratory judgment action filed against him by Banner Health System. The AG contends that this Court lacks subject matter jurisdiction, or in the alternative that the case is not ripe for adjudication, or in the alternative the Court should exercise its discretion and abstain from hearing the matter. Banner argues that federal subject matter jurisdiction exists by way of the Young Doctrine. For the reasons articulated below, the AG's motion to dismiss is GRANTED.
The Court will not specially address ripeness or abstention because it lacks subject matter jurisdiction. However, should this Court somehow gain jurisdiction it would welcome a renewed motion to abstain.
II. FACTUAL BACKGROUND
Banner is a private, nonprofit health care system based in Phoenix, Arizona that operates numerous health care facilities in the western United States. Banner operates several health care facilities in North Dakota. Banner hopes to use the proceeds from the sale of some of these facilities to further its overall charitable mission in its facilities outside the State of North Dakota.
After Banner sold some of its North Dakota facilities, the AG informed Banner that the sale proceeds were subject to a constructive or charitable trust and that Banner must leave a portion of the sale proceeds in North Dakota.
Thereafter, Banner filed the present case in federal court seeking declaratory or injunctive relief from what it claims to be unconstitutional threats from the AG. The AG later filed a parallel case in state court, which is stayed pending a decision from this Court.
II. LEGAL DISCUSSION
Federal subject matter can be established with a federal question or diversity of citizenship. The AG brings this motion to dismiss because of lack of diversity between the parties. Banner admits to the lack of diversity, but it asserts this matter involves a federal question under the Young Doctrine. Ex Parte Young, 209 U.S. 123 (1909).
Generally, the Eleventh Amendment bars a state from being sued in federal court. The Young Doctrine works as an exception to this rule. Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261, 276 (1997). The Young Doctrine is based on a legal fiction "that when state officers violate the Constitution they lose their status as agents of the state and a suit against them is therefore merely a suit against a private individual, rather than a suit against the state in violation of the Eleventh Amendment." Martin Redish, Federal Jurisdiction: Tensions in the Allocation of Judicial Power, 193-94 (Michie 2d ed. 1989).
In Young, the Attorney General of Minnesota tried to enforce a rate-setting scheme against railroad companies. 209 U.S. at 127-31. The Court permitted a suit for injunctive or declaratory relief because the railroads could not test the constitutional validity of the statute without risking imprisonment and heavy fines. Id. at 164-65. The rate-setting scheme was deemed unconstitutional in violation of the Equal Protection clause. Id. at 149.
Young itself is quite distinguishable from the present case. In Young, the statute itself was unconstitutional. Id. at 168. In the present case, Banner asserts not that the state constructive trust or charitable trust law is unconstitutional per se, but that the AG's threat to seek charitable or constructive trust status on the sale proceeds is unconstitutional. However, the AG's threats are constitutionally insignificant because the imposition of trust status is at the discretion of the court. There is no constitutional violation if the imposition of penalties is subject to judicial discretion. United States v. Reilly Tar Chemical Corp., 606 F. Supp. 412, 417 (D.Minn. 1985). In Young, the railroad could not test the rate scheme in state court without incurring heavy penalties, but here, Banner will have every opportunity to present its case before an independent judicial officer who decides whether to impose trust status on the sale proceeds. 209 U.S. at 147-48.
Not only is Young itself distinguishable, the present case does not fall within one of the two types of cases where the Young Doctrine is generally applied. In the aftermath of Young, federal courts have applied its rationale in two instances: (1) when there is no state forum available to vindicate federal interests and (2) when the case calls for interpretation of federal law. Coeur d'Alene Tribe, 521 U.S. at 270, 274.
At the outset it is apparent that the case does not implicate federal law. This case involves resolution of a state legal issue: whether state constructive or charitable trust law is applicable to Banner's sale proceeds. Banner asserts that the AG intends to use the state court system to prevent it from selling its property and moving the proceeds out of the state, in violation of the Takings Clause of the Fifth and Fourteenth Amendments, and the dormant Commerce Clause of Article I, Section 8. However, the state court provides an adequate forum to vindicate federal constitutional interests. Allen v. McCurry, 449 U.S. 90, 105 (1980). If Banner feels its constitutional rights are violated by application of state trust law, it can raise its concerns at the state court level.
In summary, the Eleventh Amendment controls and this Court lacks jurisdiction over the present case. Federal question jurisdiction under Young does not apply because the matter involves a question of state law and because a state court can sufficiently address the constitutional concerns, if any.
III.CONCLUSION
This Court does not have subject matter jurisdiction over the case at bar. The AG's motion to dismiss is GRANTED (doc. #3). Banner's claim and cause of action is ORDERED DISMISSED WITHOUT PREJUDICE.
IT IS SO ORDERED.