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KRIEGER v. TRANE CO.

May 22, 1991

WILLIAM KRIEGER, Plaintiff,
v.
THE TRANE COMPANY, et al., Defendants


Louis F. Oberdorfer, United States District Judge.


The opinion of the court was delivered by: OBERDORFER

LOUIS F. OBERDORFER, UNITED STATES DISTRICT JUDGE

 On May 29, 1987 plaintiff William Krieger, then an employee of ABC Electric Motor Services, went to the University of the District of Columbia to replace a failed electric motor in an airhauling unit. Krieger alleges that before beginning to remove the motor, he shut off the power to the unit. He did not, however, shut off the power to the other fans in the room, and while he was removing the motor from the unit before him, the air current from one of the other, functioning units caused the fan blade to rotate, which in turn caused the unit's pulleys and belts to turn. Those pulleys and belts severed Krieger's thumb from his left hand.

 In his original complaint, Krieger named as defendants the manufacturer of the airhauling unit, The Trane Company ("Trane"), the University of the District of Columbia ("UDC"), and the District of Columbia. That complaint alleged, among other things, design and manufacturing defects, failure to warn, and failure to operate the airhauling units in a safe manner. UDC and the District moved to dismiss for lack of subject matter jurisdiction. UDC contended that it was non sui juris ; the District contended that because it is a state for purposes of 28 U.S.C. § 1332, *fn1" it is not subject to diversity jurisdiction. See Long v. District of Columbia, 261 App. D.C. 1, 820 F.2d 409, 414 (D.C. Cir. 1987). Krieger did not oppose these motions. Instead, he amended his complaint, dropped the District and substituted the Board of Trustees of UDC for the university itself.

 Currently before the court are motions to dismiss by the remaining defendants, the Board and Trane. A hearing on these motions was held on October 31, 1991, and supplemental briefs were submitted. Now that those briefs have been received, defendants' motions are ripe for consideration.

 I.

 The Board contends that it is not subject to diversity jurisdiction because it is an alter ego or arm of the District of Columbia government. See, e.g., Moor v. County of Alameda, 411 U.S. 693, 717-18, 36 L. Ed. 2d 596, 93 S. Ct. 1785 (1973); State Highway Comm'n v. Utah Const. Co., 278 U.S. 194, 199, 73 L. Ed. 262, 49 S. Ct. 104 (1929). Krieger disputes this characterization and contends that the Board is an independent entity subject to diversity jurisdiction.

 A.

 In order to resolve this dispute, it is first necessary to determine what it means to be an arm or alter ego of a state. This question has generally been treated in pragmatic fashion: An entity is deemed to be an arm of a state whenever the state is the real party in interest. See, e.g., State Highway Comm'n, 278 U.S. at 199; Northeast Federal Credit Union v. Neves, 837 F.2d 531, 533 (1st Cir. 1988); Hughes-Bechtol, Inc. v. W. Virginia Bd. of Regents, 737 F.2d 540, 543 (6th Cir.), cert. denied 469 U.S. 1018, 83 L. Ed. 2d 359, 105 S. Ct. 433 (1984); Tradigrain, Inc. v. Mississippi State Port Auth., 701 F.2d 1131, 1132-34 (5th Cir. 1983).

  Most courts have analogized the determination of whether a state is the real party in interest for purposes of § 1332 to the determination of "whether an agency 'is sufficiently an arm of the state to qualify for the protection of the Eleventh Amendment.'" *fn2" Northeast Federal Credit Union, 837 F.2d at 534 (quoting Paul N. Howard Co. v. Puerto Rico Aqueduct Sewer Auth., 744 F.2d 880, 886 (1st Cir. 1984), cert. denied 469 U.S. 1191, 83 L. Ed. 2d 970, 105 S. Ct. 965 (1985)); accord Tradigrain, 701 F.2d at 1132; Coastal Petroleum Co. v. U.S.S. Agri-Chemicals, 695 F.2d 1314, 1318 (11th Cir. 1983). Krieger questions this analogy. He does not, however, persuasively explain how the inquiries differ or why they should, nor does the one case that he cites explicate the basis for this distinction. See University of Tennessee v. United States Fidelity & Guaranty Co., 670 F. Supp. 1379, 1381 (E.D. Tenn. 1987). Moreover, it would be both confusing and inefficient if § 1332's "alter ego" test were to differ from the Eleventh Amendment's. If that were so, a district court determining a particular entity to be independent for purposes of § 1332 would have to make a separate, and distinct, inquiry into whether that entity was independent under the Eleventh Amendment because, if that entity were found to be an arm of the state for purposes of Eleventh Amendment, the court would not have jurisdiction over it regardless of what § 1332 says. In the absence of a clear instruction from Congress, § 1332 should not be interpreted to require such an odd result; the alter ego test under § 1332 should instead be interpreted to conform to the analogous test under the Eleventh Amendment. See, e.g., NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 59 L. Ed. 2d 533, 99 S. Ct. 1313 (1979); see generally Sunstein, Interpreting Statutes in the Regulatory State, 103 Harv. L. Rev. 405, 468, 468-69 (1989).

 The Eleventh Amendment's alter ego test is context-specific and requires a case-by-case determination. See, e.g., United Carolina Bank v. Bd. of Regents, 665 F.2d 553, 557 (5th Cir. 1982) (noting that "each situation must be addressed individually"). In determining whether a state is the real party in interest, our court of appeals has focused primarily upon three factors: the intent of the states creating the entity in question, the structure of the entity and the practical consequences of a judgment against it on the state's treasury, and the control exercised by the state over it. See Morris v. Washington Metropolitan Area Transit Authority, 251 App. D.C. 42, 781 F.2d 218, 224-28 (D.C.Cir. 1986). The court of appeals also noted that the Supreme Court found the nature of the function performed by the entity to be relevant. See id. at 224 (discussing Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 59 L. Ed. 2d 401, 99 S. Ct. 1171 (1979)). Other circuits have considered the entity's corporate powers, such as whether it has been separately incorporated; whether it has the power to sue, be sued, and enter into contracts; and whether its property is immune from state taxation. See, e.g., Blake v. Kline, 612 F.2d 718, 722 (3rd Cir. 1979), cert. denied, 447 U.S. 921, 65 L. Ed. 2d 1112, 100 S. Ct. 3011 (1980).

 Thus, in determining whether D.C. is the real party in interest in this case, it is necessary to weigh the intent of Congress when it created the Board of Trustees, the corporate powers of the Board, the function performed by the Board, the control exercised over it by D.C., and the practical impact that a judgment against the Board would have upon D.C. Furthermore, in light of the fact that in Morris v. WMATA our court of appeals largely ignored the corporate powers of WMATA, that factor should be given less weight than the others. By the same token, our court of appeals focused primarily upon the practical impact of the judgment upon the state's treasury. See Morris v. WMATA, 781 F.2d at 223, 225-27. In light of that emphasis, and also keeping in mind that the purpose of the inquiry is to determine the real party in interest, the practical impact of a judgment against the Board should be given the greatest weight of the various factors.

 B.

 With these principles in mind, it is now necessary to turn to ...


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