United States District Court, N.D. Alabama, Northeastern Division
ALABAMA SPACE SCIENCE EXHIBIT COMMISSION doing business as U.S. SPACE & ROCKET CENTER, Plaintiff,
MERKEL AMERICAN INS. CO., Defendant.
MEMORANDUM OPINION AND ORDER
C. BURKE UNITED STATES DISTRICT JUDGE
Alabama Space Science Exhibit Commission d/b/a U.S. Space
& Rocket Center (“ASSEC” or
“plaintiff”) has filed a Motion to Remand (doc.
5) on the basis that the Court lacks subject matter
jurisdiction because there is no diversity of citizenship
between the parties. Defendant Merkel American Insurance
Company (“Merkel”) filed a response (doc. 7), and
ASSEC filed a reply (doc. 8). Therefore, the Motion to Remand
is ready for review. For the reasons stated herein, the
Motion to Remand is denied.
insurance coverage dispute was initially filed by ASSEC in
the Circuit Court of Madison County. (Doc. 1-1, pp. 3-11).
Merkel removed the action to this Court on April 18, 2019.
(Doc. 1). ASSEC subsequently filed the Motion to Remand.
ASSEC argues that the Court lacks subject matter jurisdiction
because it is an arm of the State of Alabama - not a citizen
of the State of Alabama - and therefore there is no diversity
jurisdiction. In particular, ASSEC, applying a four-factor
test, argues that it is an arm of the state. ASSEC does not
contest the amount in controversy.
response, Merkel notes, among other things, that ASSEC has
raised and lost the same argument (i.e., that it is
an arm of the state) multiple times in another case in the
Northern District of Alabama, Alabama Space Science
Exhibit Commission v. Odysseia Co., Ltd.,
5:14-cv-413-MHH. Applying the same four factors as ASSEC,
Merkel argues that ASSEC is not an arm of the state.
reply, ASSEC argues at least two things have changed since
the motions to remand in Odysseia were decided.
First, ASSEC states that the Alabama Supreme Court's
opinion in Barnhart v. Ingalls, No. 1170253, 2018 WL
6074918 (Ala. Nov. 21, 2018), sheds light on the issue.
Second, ASSEC states that the prior opinions in
Odysseia were based on a limited factual record and
that it has filed a motion for summary judgment in
Odysseia with respect to the diversity jurisdiction
issue that includes the factual record present in this
Court will address these arguments, as well as other
arguments made by the parties, to the extent necessary, in
the next section.
1332(a) states that district courts shall have original
jurisdiction of all civil actions where the matter in
controversy exceeds $75, 000 and is between “citizens
of different States.” Id. at §
1332(a)(1). The burden of establishing subject matter
jurisdiction falls on the party invoking removal. Univ.
of S. Alabama v. Am. Tobacco Co., 168 F.3d 405, 411-12
(11th Cir. 1999). Furthermore, federalism dictates that
“all doubts about jurisdiction should be resolved in
favor of remand to state court.” Id. at 411.
is well established that a state is not a citizen of a state
for the purpose of diversity jurisdiction under 28 U.S.C.
§ 1332.” Id. at 412. “A public
entity or political subdivision of a state, unless simply an
‘arm or alter ego of the State,' however, is a
citizen of the state for diversity purposes.”
Id. (quoting, in part, Moor v. Alameda
County, 411 U.S. 693, 71-18 (1973)). Therefore, if a
party is deemed to be an arm or alter ego of the State,
diversity jurisdiction does not exist. Id. As noted,
plaintiff contends that it is not a citizen for purposes of
Section 1332 because it is an arm of the State of Alabama.
the question of diversity jurisdiction is distinct from that
of immunity, see Parks v. Carriere Consol. Sch.
Dist., 12 F.2d 37, 38 (5th Cir. 1926), we have also held
that the Eleventh Amendment immunity analysis is applicable
to determinations of citizenship for the purpose of diversity
jurisdiction.” Id. at 412. To determine
whether a party is an arm of the state in the Eleventh
Circuit, a court must consider four factors: “(1) how
the state law defines the entity; (2) the degree of state
control over the entity; (3) where the entity derives its
funds; and (4) who is responsible for judgments against the
entity.” Nichols v. Alabama State Bar, 815
F.3d 726, 732 (11th Cir. 2016). Indeed, the parties agree on
the four factors to be applied. (Doc. 5, p. 8; Doc. 7, p. 8).
an agency is an arm of the state is a federal question;
however, “whether that standard is met will be
determined by carefully reviewing how the agency is defined
by state law.” Versiglio v. Bd. of Dental Examiners
of Alabama, 686 F.3d 1290, 1291 (11th Cir. 2012);
see also Manders, 338 F.3d 1304, 1309 (11th Cir.
2003) (“The issue of whether an entity is an ‘arm
of the State' for Eleventh Amendment purposes is
ultimately a question of federal law. But the federal
question can be answered only after considering provisions of
state law.”). Furthermore, “[w]hether a defendant
is an ‘arm of the State' must be assessed in light
of the particular function in which the defendant was engaged
when taking the actions out of which liability is asserted to
arise.” Manders, 338 F.3d at 1308. Thus,
although ASSEC is not the defendant in this action, the Court
considers its analysis in the context of the lawsuit before
it, i.e., a lawsuit by ASSEC against its insurance
company, Merkel, with respect to Merkel's alleged duty to
defend and indemnify it for a dispute related to payment for
production of an animated television series by non-party
Space Race, LLC.
How Alabama law defines ASSEC
Court has found no Alabama law expressly declaring ASSEC an
arm of the state. Other courts in this district, however,
have determined that ASSEC is not an arm of the state.
See, e.g., Alabama Space Science Exhibit
Comm'n v. Odysseia Co., Ltd., 5:14-cv-413-MHH, Mem.
Op. and Order, Doc. 52 (N.D. Ala. Aug. 10, 2016) (finding
that ASSEC is not an arm of the state and is therefore a
citizen of Alabama for purposes of diversity jurisdiction,
Order, Doc. 72 (N.D. Ala. April 26, 2017) (declining to
disturb its prior decision that ASSEC is a citizen of Alabama
for purposes of diversity jurisdiction); see also Parker
v. Alabama Space Science Exhibit Comm'n,
5:15-cv-2261-AKK, Mem. Op. and Order, Doc. 12 (N.D. Ala. June
6, 2016) (finding that the U.S. Space & Rocket Center
operated by ASSEC is not an arm of the state for Eleventh
Amendment sovereign immunity purposes). But cf.
Ingalls v. U.S. Space & Rocket Ctr., No.
2:14-CV-699-WKW, 2015 WL 4528687, at *6 (M.D. Ala. July 27,
2015) (“Based upon an examination of the
Commission's founding legislation and Alabama case law,
the court finds that Alabama courts would determine that the
Commission functions as an arm of the state and is,
therefore, entitled to Eleventh Amendment immunity.”).
While the Court realizes that it is not bound by the
decisions of other judges in this district, it does find them
persuasive. Likely anticipating this possibility, plaintiff,
while making many of the same arguments that it did in the
other cases, primarily argues that a recent Alabama Supreme
Court case, Barnhart v. Ingalls, __ So. 3d, 2018 WL
6074918 (Ala. Nov. 21, 2018), demonstrates that Alabama law
conclusively establishes that ASSEC is an arm of the State of
Alabama and, as a result, this Court should do the same. The
Court will therefore examine Barnhart.
Barnhart, the Alabama Supreme Court considered what
it construed as an appeal by three ASSEC officers in their
official and individual capacities. The basis of
Barnhart was an audit of ASSEC conducted by the
Department of Examiners of Public Accounts
(“DEPA”) in which DEPA discovered that ASSEC had
not complied with Alabama law in (1) its payment of annual
longevity bonuses to ASSEC employees; and (2) in the manner
it compensated ASSEC employees for working on certain state
holidays. Id. at *1 (citing Ala. Code §
36-6-11(a) and § 1-3-8). Representatives of ASSEC
maintained, among other things, that the legislation pursuant
to which it was created removed it from the purview of
certain state employment laws, including the benefits
statutes. Plaintiffs, former employees of ASSEC, filed suit
against ASSEC and several ASSEC officers, alleging that they
had not received all compensation to which they were entitled
by statute during their tenures as ASSEC employees. In
particular, plaintiffs alleged that they had not been paid
the amount of longevity bonuses to which they were entitled
when they were ASSEC employees and that they had not been
properly compensated for working on state holidays that were
not observed at ASSEC.
requested the following: (1) judgment declaring that
ASSEC's existing policies and compensation plan did not
comply with the terms of the Alabama benefits statutes
(“the declaratory-relief claim”); (2) an
injunction requiring ASSEC officers to comply with those
statutes (“the prospective-relief claim”); (3) an
award of money previously earned, but not paid, because of
the failure to comply with the statutes (“the
retrospective-relief claim”); and (4) various
negligence/wantonness and breach-of-fiduciary duty claims
against the ASSEC officers in their individual capacities
(“the individual-capacity claims”). The circuit
court certified for class-action treatment the
declaratory-relief claim, the retrospective-relief claim, and
the individual-capacity claims; the circuit court dismissed
the claim against ASSEC on state immunity grounds. The ASSEC
officers petitioned the Alabama Supreme Court for a writ of
mandamus directing the circuit court to vacate its order
certifying the class and dismissing the claims against them.
For reasons not pertinent here, the Alabama Supreme Court
treated the petition for writ of mandamus as an appeal.
Alabama Supreme Court then considered whether claims against
the three ASSEC officers should be dismissed, or, in the
alternative, whether to vacate the circuit court's order
certifying those claims for class-action treatment. The
Alabama Supreme Court first considered the issue of whether
the claims against the ASSEC officers were barred by state
immunity. The Alabama Supreme Court concluded that
plaintiffs' retrospective-relief claim for money owed was
not barred by state-agent immunity because, “if the
benefit statutes obligated [ASSEC] officers to pay the named
plaintiffs compensation they were not paid, the [ASSEC]
officers had no discretion to avoid that requirement;
obedience to the statute is mandatory.” Id. at
*8. The Alabama Supreme Court concluded, “In sum, if it
is ultimately determined that the named plaintiffs should
have received additional compensation pursuant to the benefit
statutes, the [ASSEC] officers had a legal duty to make those
payments all along, and in finally doing so they are merely
performing a ministerial act. Accordingly, the named