Opinion
No. 6:20-cv-00526
2021-07-15
Shara ARMSTRONG, Plaintiff, v. CUMBERLAND ACADEMY, Defendant.
William S. Hommel, Jr., Hommel Law Firm, Tyler, TX, for Plaintiff. Joseph Emil Hoffer, Emily Joan Carson Boney, Ricardo Rene Lopez, Schulman Lopez Hoffer & Adelstein, LLP, San Antonio, TX, for Defendant.
William S. Hommel, Jr., Hommel Law Firm, Tyler, TX, for Plaintiff.
Joseph Emil Hoffer, Emily Joan Carson Boney, Ricardo Rene Lopez, Schulman Lopez Hoffer & Adelstein, LLP, San Antonio, TX, for Defendant.
OPINION AND ORDER
J. Campbell Barker, United States District Judge Plaintiff filed this lawsuit alleging unlawful employment discrimination by her former employer, Cumberland Academy, an open-enrollment charter school. Because the Academy qualifies as an arm of the State of Texas under the relevant legal test, it has immunity from this suit. Its motion to dismiss on that basis is therefore granted. See generally Sullivan v. Texas A&M Univ. Sys. , 986 F.3d 593, 595 (5th Cir. 2021) ; Walker v. Harmony Pub. Sch. , No. 4:20-cv-03872 (S.D. Tex. Feb. 11, 2021); Reyna v. IDEA Pub. Sch. , No. 7:20-cv-121 (S.D. Tex. Feb. 22, 2021).
Background
Plaintiff Shara Armstrong alleges that she was fired after a little over a year as a teacher at Cumberland Academy, and that her firing resulted from illness related to her diabetes, a disability of which the Academy was aware. In this lawsuit, Armstrong asserts causes of action under the Americans with Disabilities Act, the Texas Commission on Human Rights Act (TCHRA), and the Family Medical Leave Act. She only seeks monetary relief, not equitable relief.
Cumberland Academy is a Texas non-profit corporation that has a contract with the State of Texas to run open-enrollment charter schools. The Academy accepts students zoned for 30 independent school districts across much of East Texas. In the most recent fiscal year, 92% of the Academy's funding came from the State, which is the Academy's only assured source of funding. Unlike independent school districts, the Academy cannot levy taxes.
Analysis
The Academy moves to dismiss this lawsuit for lack of jurisdiction, arguing that it qualifies for sovereign immunity as an arm of the State of Texas. Facing that motion, Armstrong bears the burden of demonstrating the court's jurisdiction. Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001) (per curiam) (citation omitted). The court can rely on the pleadings, undisputed facts, and its own resolution of disputed facts. Meliezer v. Resol. Tr. Co. , 952 F.2d 879, 881 (5th Cir. 1992) (citation omitted).
The Supreme Court has held that the Constitution's structure confirms a background principle of state sovereign immunity from unconsented-to suits in federal court, even outside of Eleventh Amendment immunity. See Alden v. Maine , 527 U.S. 706, 712–13, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999) (clarifying that states’ sovereign immunity "neither deprives from, nor is limited by, the terms of the Eleventh Amendment"). A state's sovereign immunity in federal court extends to any entity that qualifies as an alter ego or arm of the state. Vogt v. Bd. of Comm'rs , 294 F.3d 684, 688–89 (5th Cir. 2002). Whether an entity qualifies turns on a consideration of: (1) whether state statutes and case law characterize the entity as an arm of the state; (2) the entity's source of funding; (3) the entity's degree of local autonomy; (4) whether the entity is concerned primarily with local, as opposed to statewide, problems; (5) whether the entity has authority to sue and be sued in its own name; and (6) whether the entity has the right to hold and use property. See Clark v. Tarrant Cty. Tex. , 798 F.2d 736, 744–45 (5th Cir. 1986). No combination of factors is necessary to demonstrate sovereign immunity as an arm of the state, but the source of an entity's funding is the most important consideration. See Perez v. Region 20 Educ. Serv. Ctr. , 307 F.3d 318, 327 (5th Cir. 2002) (citing Hudson v. City of New Orleans , 174 F.3d 677, 682 (5th Cir. 1999) ). That factor's importance reflects sovereign immunity's purpose of protecting state funds. Delahoussaye v. City of New Iberia , 937 F.2d 144, 147–48 (5th Cir. 1991) (citation omitted).
If the Academy is an arm of the State of Texas, sovereign immunity bars this suit. Neither the Academy nor Texas has consented to suit under these circumstances; a state's consent to suit in its own courts is not consent to suit in federal courts. See, e.g., Hernandez v. Tex. Dep't of Hum. Servs. , 91 F. App'x 934, 935 (5th Cir. 2004) (per curiam) ("Texas’ waiver of sovereign immunity [for TCHRA claims] in its own courts, however, is not a waiver of its Eleventh Amendment immunity in federal courts.") (citation omitted). Congress has not abrogated Texas's sovereign immunity regarding any of the claims presented here. See Bryant v. Tex. Dep't of Aging & Disability Servs. , 781 F.3d 764, 769 (5th Cir. 2015) (holding that the self-care provision of the FMLA does not abrogate sovereign immunity); Perez , 307 F.3d at 326 ("Congress did not abrogate the states’ sovereign immunity in enacting Title I of the ADA.") (citation omitted). And Armstrong seeks only monetary relief and has not sued any individual official for equitable relief. So the Ex parte Young exception to sovereign immunity does not apply. The court therefore turns to the six-factor Clark test.
1. State-law characterization. The first Clark factor concerns whether state law views an entity as an arm of the state. Clark , 798 F.2d at 744 (citations omitted). This consideration favors immunity.
Under Texas law, open-enrollment charter schools are "part of the public school system of this state" and are designated as "governmental unit[s]" entitled to the same immunity from suit in matters related to school operation as are school districts. Tex. Educ. Code Ann. §§ 12.105, 12.1056(a), (b) (West 2019). State case law confirms that charter schools are "an integral part of Texas's public-education system[.]" Tex. Educ. Agency v. Acad. of Careers and Techs., Inc. , 499 S.W.3d 130, 135 (Tex. App. 2016) (citation omitted). Unlike independent school districts that tax and receive local tax revenues, open-enrollment charter schools are wholly funded by the State, receiving no local tax revenue. See Tex. Educ. Code Ann. § 12.102(4) (West 2019) (denying charter schools the power to levy taxes).
The Texas Supreme Court has thus concluded that "open-enrollment charter schools act as an arm of the State government" and are entitled to immunity in state courts. El Paso Educ. Initiative, Inc. v. Amex Props., LLC , 602 S.W.3d 521, 529–30 (Tex. 2020) (citations omitted). Although that decision focused on immunity in Texas state courts, its analysis overlaps with the Clark factors in several respects. The Texas Supreme Court emphasized that open-enrollment charter schools "are accountable to State government through oversight of their charters and through the receipt of substantial public funding." Id. at 529. And it reasoned that the schools were entitled to immunity because "[d]iverting charter school funds to defend lawsuits and pay judgments affects the State's provision of public education and reallocates taxpayer dollars from the legislature's designated purpose." Id. at 530 (citation omitted). Armstrong has not meaningfully distinguished that reasoning for purposes of the federal arm-of-the-state test. For all of those reasons, the first Clark factor favors the Academy for purposes of immunity.
2. Source of funding. The Clark factor regarding state funding considers "both the state's liability for a judgment rendered against [an entity] and the state's liability for general debts and obligations." Perez , 307 F.3d at 328 (citation omitted). Courts also examine whether any state funding is earmarked for a particular purpose. Id. (citation omitted).
An open-enrollment charter school receives state funds under Texas Education Code § 12.106, and those state public funds may be used only for public-school purposes as authorized under Texas Education Code § 12.107. Pursuant to those provisions, the Academy received 92% of its funding from the State in the most recent fiscal year, a fact that Armstrong does not dispute.
The funding analysis here resembles that in Perez v. Region 20 Education Service Center. There, the Fifth Circuit held that education service centers were arms of the State of Texas. Id. at 329. The centers, like the Academy here, received most of their funding from the State. Id. And the Fifth Circuit emphasized a feature of Texas law that applies with equal force to the Academy: "unlike local school districts, the [c]enters do not possess any tax levying or bonding authority that could be used to raise funds." Id. (citation omitted). Although Texas law did not indemnify the centers, their funding dependence on the State meant that "a judgment rendered against the [c]enters would be paid in large portion by the [S]tate." Id. The same reasoning justifies deeming open-enrollment charter schools as financially dependent on the State, as the Texas Supreme Court has concluded in the context of sovereign immunity in state court. El Paso Educ. , 602 S.W.3d at 530 (concluding that "[d]iverting charter school funds to defend lawsuits and pay judgments affects the State's provision of public education and reallocates taxpayer dollars from the legislature's designated purpose") (citing Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 124 (Tex. 2015) ).
The second Clark factor, like the first, favors deeming the Academy an arm of the State of Texas for purposes of immunity from suit. And because the source of funding is the most important factor, Perez , 307 F.3d at 327, the Academy has a powerful argument for immunity. See id. ("No one [ Clark ] factor is dispositive, though we have deemed the source of an entity's funding a particularly important factor because a principal goal of the Eleventh Amendment is to protect state treasuries.").
3. Local autonomy. The third factor focuses on whether the Academy exercises local autonomy or whether it is primarily controlled by the State of Texas. Open-enrollment charter schools like the Academy, are subject to state requirements to report misconduct and to the state education commissioner's authority to inspect records to ensure compliance with those reporting requirements. Tex. Educ. Code Ann. § 21.006 (West 2019). The commissioner can also revoke the Academy's charter for any of several reasons, including financial mismanagement. Id. § 12.1162(a)(1)–(3). As Texas courts have noted, the State has "unfettered discretion" over a charter school. Tex. Educ. Agency v. Am. YouthWorks, Inc. , 496 S.W.3d 244, 261–62 (Tex. App 2016), aff'd sub nom., Honors Acad., Inc. v. Tex. Educ. Agency , 555 S.W.3d 54 (Tex. 2018) ; see also El Paso Educ. , 602 S.W.3d at 529 (noting that open-enrollment charter schools "must adhere to state law and the Commissioner's regulations governing public schools or risk revocation of its charter") (citation omitted). Although open-enrollment charter schools undeniably possess some autonomy over discretionary functions, they are also subject to substantial state supervision. The third Clark factor is either neutral or in the Academy's favor.
4. Local versus statewide focus. The fourth factor concerns whether the Academy focuses primarily on local or statewide issues. See Pendergrass v. Greater New Orleans Expressway Comm'n , 144 F.3d 342, 347 (5th Cir. 1998) (focusing on "whether the entity acts for the benefit and welfare of the state as a whole or for the special advantage of local inhabitants") (citation omitted). The Academy and similarly situated institutions are accountable to the State and not to local officials. See Perez , 307 F.3d at 330 (focusing on service centers’ accountability to Texas officials). The tremendous geographical scope of the Academy's operations—which encompass much of East Texas—also show that it is accountable to the State and not to individual localities. See id. at 331 ("The Centers collect and deliver educational resources throughout the [S]tate, not just in one area[.] ....") (citation omitted). The Academy's scope is enough to favor an arm-of-the-state finding. See id. (holding that service centers are entitled to sovereign immunity because "they serve as administrative divisions of the unitary state educational system").
5. Authority to sue and be sued. The Texas Education Code grants school districts the right to sue and be sued, Tex. Educ. Code Ann. § 11.151(a) (West 2019), but it does not mention open-enrollment charter schools. In nearly identical circumstances, see Perez , 307 F.3d at 331, the Fifth Circuit held that the fifth Clark factor "slightly favors immunity." Id. Armstrong has provided no reason to reach a different conclusion in her case.
6. Property ownership and use. The final factor—whether the Academy can hold and use property—favors immunity. Under Texas law, all property purchased with funds received by a charter holder (1) "is considered to be public property for all purposes under state law," (2) "is property of [Texas] held in trust by the charter holder," and (3) "may be used only for a purpose for which a school district may use school district property." Tex. Educ. Code Ann. § 12.128(a)(1)–(3) (West 2019). Although the Texas Education Code was amended to explain that a charter holder "holds title to any property ... and may exercise complete control over the property," id. § 12.128(b-1), that language fleshes out the scope of the trust over property used by the charter schools as opposed to vesting unrestricted private rights in the property. See Honors Acad., Inc. , 555 S.W.3d at 63 (finding that the Texas Legislature "has [not] ... created vested private-property rights in the creation of the charter school system").
Notably, the shuttering of an open-enrollment charter school requires the state education commissioner to take possession of and assume control over the property used at the school. See Tex. Educ. Code Ann. § 12.128(b-1), (c) (West 2019). The commissioner thus has a grip on property held by the Academy. See Premier Learning Acad., Inc. v. Tex. Educ. Agency , 521 S.W.3d 439, 444 (Tex. App. 2017) ("The Education Code gives the TEA commissioner broad authority over FSP funds and the public property purchased or leased with those funds."). The final Clark factor is thus either neutral or favors immunity.
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Armstrong relies on Voices for International Business and Education, Inc. v. National Labor Relations Board , 905 F.3d 770 (5th Cir. 2018), which held that Louisiana charter schools are not a political subdivision of the State. Id. at 778. That case, however, concerned the National Labor Relations Act's barrier referencing "any State or political subdivision thereof," 29 U.S.C. § 152(2), which turns on whether the alleged "political subdivision" is accountable to the public. Voices , 905 F.3d at 773–74. That is a narrower class of entities than the class of arms of the state for purposes of sovereign immunity. The latter group requires a different legal test—one the Fifth Circuit has emphasized is importantly concerned with the protection of state funds. See Delahoussaye , 937 F.2d at 147–48. The governing Clark factors indicate that the Academy is an arm of the state for purposes of sovereign immunity from unconsented-to suit. Accordingly, the Academy is entitled to dismissal of Armstrong's ADA, FMLA, and TCHRA claims. See Sullivan , 986 F.3d at 595.
The Academy's motion to dismiss under Rule 12(b)(1) (Doc. 3) is granted, and this action is dismissed without prejudice. See Warnock v. Pecos Cty. , 88 F.3d 341, 343 (5th Cir. 1996) ("Because sovereign immunity deprives the court of jurisdiction, the claims barred by sovereign immunity can be dismissed only under Rule 12(b)(1) and not with prejudice.").
So ordered by the court on July 15, 2021.