hutto v. south carolina retirement system, no. 13-1523 (4th cir. dec. 5, 2014)
TRANSCRIPT
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PUBLISHED
UNI TED STATES COURT OF APPEALSFOR THE FOURTH CI RCUI T
No. 13-1523
GAI L M. HUTTO; ELI ZABETH W. HODGE; MARGARET B. LI NEBERGER;LYNN R. ROGERS; NANCY G. SULLI VAN; J ANE P. TERWI LLI GER;J ULI AN W. WALLS; DEBRA J . ANDREWS, and al l ot hers si mi l ar l ysi t uat ed,
Pl ai nt i f f s - Appel l ant s ,
v.
THE SOUTH CAROLI NA RETI REMENT SYSTEM; THE POLI CE OFFI CERSRETI REMENT SYSTEM; THE SOUTH CAROLI NA RETI REMENT SYSTEMSGROUP TRUST; NI KKI R. HALEY, Governor of Sout h Carol i na, i nher of f i ci al capaci t y as ex of f i ci o Chai r woman of t he Sout hCar ol i na Budget and Cont r ol Boar d; CURTI S M. LOFTI S, J R. ,Tr easur er of t he Stat e of South Car ol i na, i n hi s of f i ci alcapaci t y as an ex of f i ci o member of t he Sout h Car ol i naBudget and Cont r ol Board; RI CHARD ECKSTROM, Compt r ol l erGener al of t he St at e of Sout h Car ol i na, i n hi s of f i ci alcapaci t y as an ex of f i ci o member of t he Sout h Car ol i na
Budget and Cont r ol Boar d; HUGH K. LEATHERMAN, Chai r man oft he Sout h Car ol i na Senat e Fi nance Commi t t ee, i n hi sof f i ci al capaci t y as an ex of f i ci o member of t he Sout hCarol i na Budget and Cont r ol Boar d; W. BRI AN WHI TE, Chai r manof t he Sout h Carol i na House of Repr esent at i ves Ways andMeans Commi t t ee, i n hi s of f i ci al capaci t y as an ex of f i ci omember of t he Sout h Carol i na Budget and Cont r ol Boar d;MARCI A S. ADAMS, i n her of f i ci al capaci t y as Execut i veDi r ect or of t he Sout h Car ol i na Budget and Cont r ol Boar d;DAVI D K. AVANT, i n hi s of f i ci al capaci t y as Execut i veDi r ect or of t he Sout h Car ol i na Publ i c Empl oyee Benef i t
Aut hor i t y,
Def endant s - Appel l ees.
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NI EMEYER, Ci r cui t J udge:
Sout h Carol i na publ i c empl oyees commenced t hi s cl ass act i on
chal l engi ng t he const i t ut i onal i t y of t he Sout h Car ol i na St at e
Ret i r ement Syst em Pr eservat i on and I nvest ment Ref or m Act , 2005
S. C. Act s 1697 ( t he 2005 Act ) . That Act amended Sout h
Car ol i na s r et i r ement l aws by r equi r i ng publ i c empl oyees who
r et i r e and then ret ur n t o wor k t o make, begi nni ng on J ul y 1,
2005, t he same cont r i but i ons t o st at e- cr eat ed pensi on pl ans as
pr e- r et i r ement empl oyees but wi t hout r ecei vi ng f ur t her pensi on
benef i t s. The pl ai nt i f f s cl ai med t hat t he 2005 Act ef f ect ed a
t aki ng of t hei r pr i vat e pr oper t y, i n vi ol at i on of t he Taki ngs
Cl ause of t he Fi f t h Amendment and t he Due Process Cl ause of t he
Four t eent h Amendment . They named as def endant s t wo st at e-
cr eat ed pensi on pl ans, i n whi ch t hey ar e par t i ci pant s; t he Sout h
Car ol i na Ret i r ement Syst ems Gr oup Tr ust ( t he Tr ust ) , whi ch
hol ds t he pensi on pl ans asset s; and st at e of f i ci al s ser vi ng as
t r ust ees and admi ni st r at or s of t he pensi on pl ans. For r el i ef ,
t hey sought r epayment of al l cont r i but i ons wi t hhel d si nce
J ul y 1, 2005, and i nj unct i ve r el i ef prohi bi t i ng t he f uture
col l ect i on of such cont r i but i ons.
Pur suant t o t he def endant s mot i on, t he di st r i ct cour t
di smi ssed t he compl ai nt on t he gr ound t hat al l of t he def endant s
ar e ent i t l ed t o sover ei gn i mmuni t y.
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We af f i r m, al bei t on r easoni ng sl i ght l y di f f er ent f r om t hat
gi ven by t he di st r i ct cour t . We concl ude, as di d t he di st r i ct
cour t , t hat t he pensi on pl ans and t he Tr ust ar e ar ms of t he
St at e of Sout h Car ol i na and t heref or e have soverei gn i mmuni t y.
Li kewi se, we concl ude t hat t he st at e of f i ci al s sued i n t hei r
of f i ci al capaci t i es f or r epayment of pensi on- pl an cont r i but i ons
have sover ei gn i mmuni t y. Fi nal l y, we concl ude t hat t he st at e
of f i ci al s sued i n t hei r of f i ci al capaci t i es f or pr ospect i ve
i nj unct i ve rel i ef have sover ei gn i mmuni t y because thei r dut i es
bear no r el at i on t o t he col l ect i on of t he publ i c empl oyees
cont r i but i ons t o t he pensi on pl ans, pr ecl udi ng appl i cat i on of Ex
par t e Young, 209 U. S. 123 ( 1908) . I n r eachi ng t hese
concl usi ons, we r ej ect t he pl ai nt i f f s ar gument t hat t hei r
cl ai ms under t he Taki ngs Cl ause of t he Fi f t h Amendment are
exempt f r omt he pr otect i on of t he El event h Amendment .
I
The pl ai nt i f f s ar e publ i c empl oyees and par t i ci pant s i n t wo
pensi on pl ans cr eat ed by Sout h Car ol i na i n 1962 - - t he Sout h
Car ol i na Ret i r ement Syst em and t he Sout h Car ol i na Pol i ce
Of f i cer s Ret i r ement Syst em ( col l ecti vel y, t he Ret i r ement
Syst em) . 1 See S. C. Code Ann. 9- 1- 20, 9- 11- 20( 1) . I n t hei r
1 I n al l , Sout h Car ol i na has cr eat ed f i ve pensi on pl ans f orpubl i c empl oyees, each r ef er r ed t o as a Ret i r ement Syst em - -
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compl ai nt , t hey al l eged t hat t hey and ot her s si mi l ar l y si t uat ed
are r et i r ed cont r i but i ng members of t he Ret i r ement Syst em, who
r et ur ned t o wor k on or af t er J ul y 1, 2005, when t he 2005 Act
went i nt o ef f ect , and who ar e, by r eason of t he 2005 Act ,
r equi r ed t o cont r i but e a por t i on of t hei r gr oss ear ni ngs t o
t he Ret i r ement Syst em wi t hout r ecei vi ng any addi t i onal ser vi ce
credi t or i nt er est on t hei r ret i r ement account s. Bef or e
J ul y 1, 2005, r et i r ed par t i ci pant s coul d r et urn t o wor k f or a
sal ar y of up t o $50, 000 wi t hout f or f ei t i ng t he r i ght t o r ecei ve
r et i r ement benef i t s and wi t hout havi ng t o make f ur t her
cont r i but i ons to t he Ret i r ement Syst em. See Ahr ens v. St at e,
709 S. E. 2d 54, 56- 57 ( S. C. 2011) . But t hi s changed wi t h t he
enact ment of t he 2005 Act , and r et i r ed par t i ci pant s who ret ur n
t o work are now r equi r ed t o make t he same cont r i but i ons t o t he
Ret i r ement Syst em as pr e- r et i r ement empl oyees but wi t hout
accr ui ng addi t i onal ser vi ce credi t f or pensi on benef i t s. See
S. C. Code Ann. 9- 1- 1790( C) , 9- 11- 90( 4) ( c) . The Sout h
Carol i na General Assembl y made t he change t o hel p f und t he
t he Sout h Car ol i na Ret i r ement Syst em, t he Ret i r ement Syst em f orJ udges and Sol i ci t or s of t he Stat e of South Car ol i na, t heRet i r ement Syst em f or members of t he General Assembl y of t heSt at e of Sout h Car ol i na, t he Nat i onal Guar d Ret i r ement Syst em,and t he Sout h Car ol i na Pol i ce Of f i cer s Ret i r ement Syst em. S. C.Code Ann. 9- 1- 20, 9- 8- 20, 9- 9- 20, 9- 10- 20( A) , 9- 11- 20( 1) .
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Ret i r ement Syst em and, i n par t i cul ar , t o secur e f ut ur e cost - of -
l i vi ng adj ust ment s.
The pl ai nt i f f s commenced t hi s cl ass act i on i n August 2010
on behal f of t hemsel ves and al l ot her par t i ci pat i ng empl oyees
who ret ur ned t o wor k on or af t er J ul y 1, 2005, al l egi ng t hat , by
enf or ci ng t he 2005 Act , t he def endant s conf i scated t hei r
pr i vat e pr oper t y, i n vi ol at i on of t he Taki ngs Cl ause of t he
Fi f t h Amendment and t hei r pr ocedur al due pr ocess r i ght s under
t he Four t eent h Amendment . I n addi t i on t o nami ng as def endant s
t he t wo pensi on pl ans, t he pl ai nt i f f s named t he Tr ust , whi ch
hol ds t he assets of t he Ret i r ement Syst em, and a number of st ate
of f i ci al s i n t hei r of f i ci al capaci t i es who, as member s or
execut i ve di r ect or s of t he St at e Budget and Cont r ol Boar d and
t he Publ i c Empl oyee Benef i t Aut hor i t y, serve as t r ust ees and
admi ni st r ators of t he Ret i r ement Syst em. The St ate Budget and
Cont r ol Boar d and t he Publ i c Empl oyee Benef i t Aut hor i t y ar e t he
st at ut or i l y desi gnat ed co- t r ust ees of t he Ret i r ement Syst em.
S. C. Code Ann. 9- 1- 1310( A) .
For r el i ef , t he pl ai nt i f f s sought ( 1) a decl ar at or y
j udgment t hat t he 2005 Act i s unconst i t ut i onal ; ( 2) an
i nj unct i on agai nst i t s enf or cement ; ( 3) an account i ng of al l
cont r i but i ons t hey made t o t he Ret i r ement Syst em si nce J ul y 1,
2005; ( 4) an i nj unct i on compel l i ng the r et ur n of al l such
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cont r i but i ons; and ( 5) an or der awar di ng t hem at t or neys f ees and
costs. 2
The Ret i r ement Syst em, t he Tr ust , and t he st at e of f i ci al s
f i l ed a mot i on t o di smi ss t he compl ai nt pur suant t o Feder al
Rul es of Ci vi l Pr ocedur e 12( b) ( 1) , 12( b) ( 3) , and 12( b) ( 6) ,
asser t i ng numer ous grounds f or t hei r mot i on, i ncl udi ng sover ei gn
i mmuni t y, cl ai m and i ssue pr ecl usi on based on t he pr i or st at e
l i t i gat i on, di scr et i onar y abst ent i on, and f ai l ur e t o st at e a
cl ai m upon whi ch r el i ef can be gr ant ed. The di st r i ct cour t
gr ant ed t he mot i on and di smi ssed t he compl ai nt , r el yi ng onl y on
t he def endant s soverei gn i mmuni t y under t he El event h Amendment .
2 Bef ore thi s act i on was commenced, publ i c empl oyees whor et i r ed and t hen r et ur ned t o wor k bef or e J ul y 1, 2005, al socommenced an act i on i n st at e cour t , al l egi ng that t he 2005 Actbr eached a l egi sl at i vel y cr eat ed cont r act wi t h t he ol d wor ki ng
r et i r ees and vi ol at ed t he Taki ngs Cl ause and t he Due ProcessCl ause of t he U. S. Const i t ut i on. The Sout h Car ol i na Supr emeCour t r ej ect ed the ar gument , hol di ng t hat t he ol d wor ki ngr et i r ee st at ut e [di d] not cr eat e a bi ndi ng cont r act bet ween t heSt at e and t he ol d wor ki ng r et i r ees, but t he cour t di d r emandt he case t o t he t r i al cour t f or a case by case f act ualdet er mi nat i on of whet her any act i ons of t he St at e wi t h r egar d t oi ndi vi dual ol d wor ki ng r et i r ees const i t ut ed a br each ofcont r act . Layman v. St at e, 630 S. E. 2d 265, 271- 72 ( S. C. 2006) .I n 2011, t he Sout h Car ol i na Supr eme Cour t af f i r med t he ci r cui tcour t s concl usi on t hat f or ms si gned by the ol d wor ki ngr et i r ees, st at i ng t hat t hey woul d not be r equi r ed t o pay i nt ot he pensi on pl ans, di d not cr eat e a cont r act bet ween t he St at eand t he ol d wor ki ng r et i r ees. Ahr ens, 709 S. E. 2d at 58- 60.Because t he empl oyees cl ai ms under t he Taki ngs Cl ause and t heDue Pr ocess Cl ause were f ounded on t he presumpt i on t hat acont r act ual r i ght ha[ d] been unf ai r l y t aken away, t he cour tal so af f i r med t he ci r cui t cour t s gr ant of summar y j udgment ont hose cl ai ms. I d. at 63.
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Wi t h r espect t o t he i nst i t ut i onal def endant s, t he cour t
determi ned t hat t he Ret i r ement Syst ems shoul d be consi dered an
arm of t he St ate such that El event h Amendment i mmuni t y appl i es
t o bar [ a f eder al ] cour t f r om hear i ng t he cl ai m. Hut t o v. S. C.
Ret . Sys. , 899 F. Supp. 2d 457, 473 ( D. S. C. 2012) . And
[ b] ecause Pl ai nt i f f s seek monet ar y damages, i t hel d t hat t he
cl ai ms agai nst t he i ndi vi dual def endant s wer e si mi l ar l y bar r ed.
I d. at 475 n. 14. Havi ng f ound t hat al l of t he def endant s wer e
i mmune by r eason of sover ei gn i mmuni t y, t he cour t decl i ned t o
addr ess t he def endant s r emai ni ng gr ounds f or seeki ng di smi ssal
of t he act i on.
The pl ai nt i f f s f i l ed a mot i on f or r econsi der at i on under
Rul e 59( e) , asser t i ng t hat t he di st r i ct cour t er r ed i n
di smi ssi ng t hei r cl ai ms f or a decl ar at or y j udgment and
i nj unct i ve r el i ef agai nst t he st at e of f i c i al s ser vi ng i n t hei r
of f i ci al capaci t i es. They r el i ed on Ex par t e Young, 209 U. S.
123 ( 1908) , whi ch cr eat ed an except i on t o El eventh Amendment
i mmuni t y wi t h r espect t o cl ai ms f or pr ospect i ve i nj unct i ve
r el i ef t o r emedy ongoi ng vi ol at i ons of f eder al l aw. The
di st r i ct cour t deni ed t he mot i on because, i n seeki ng t o bar t he
enf or cement of [ t he 2005 Act ] , whi ch r equi r es Pl ai nt i f f s t o pay
i nt o t he Ret i r ement Syst em, Pl ai nt i f f s r equest ed r el i ef i s
undeni abl y monetary and because an i nj unct i on order i ng t he
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r et ur n of t he cont r i but i ons al r eady wi t hhel d woul d ul t i mat el y
i mpact t he St at e t r easur y.
Thi s appeal f ol l owed.
I I
The El event h Amendment shi el ds a st at e ent i t y f r om sui t i n
f eder al cour t i f , i n [ t he ent i t y s] oper at i ons, t he st at e i s
t he real par t y i n i nt er est , i n t he sense that t he named par t y
[ i s] t he al t er ego of t he st at e. Ram Di t t a v. Md. Nat l
Capi t al Par k & Pl anni ng Comm n, 822 F. 2d 456, 457 ( 4t h Ci r .
1987) .
The pl ai nt i f f s cont end t hat t he Ret i r ement Syst em and t he
Tr ust do not have t he soverei gn i mmuni t y af f or ded a Stat e under
t he El event h Amendment because they are non- st at e ent i t [ i es]
and t hat t he di st r i ct cour t s cont r ar y concl usi on was based on
an er r oneous appl i cat i on of t he f act or s ar t i cul at ed i n Ram Di t t a
f or det er mi ni ng whet her an ent i t y i s an al t er ego of t he St at e.
They ar gue, [ T] he Di st r i ct Court shoul d have gi ven ef f ect t o
t he expr ess, unambi guous l anguage of [ Sout h Car ol i na s
r et i r ement l aws] and concl uded t hat t he Ret i r ement Syst ems ar e
i ndependent cor por at e ent i t i es f or whi ch t he St at e has no
f i nanci al obl i gat i on as i ndemni t or .
The def endant s cont end t hat Stat e l aw makes t he f i nanci al
obl i gat i ons of t he st at e Ret i r ement Syst ems obl i gat i ons of t he
St at e; t hat t he St at e cont r ol s t he Ret i r ement Syst em; t hat t he
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pensi on pl ans of t he Ret i r ement Syst em oper at e on a st at ewi de
basi s and have st atewi de concer ns; and t hat Sout h Car ol i na l aw
t r eat s the pensi on pl ans as st at e agenci es. The def endant s thus
mai nt ai n t hat t he Ret i r ement Syst em and t he Tr ust ar e arms of
t he St at e and [ t her ef or e] i mmune f r om sui t .
Whet her an act i on i s bar r ed by t he El event h Amendment i s a
quest i on of l aw t hat we r evi ew de novo. Cash v. Gr anvi l l e Cnt y.
Bd. of Educ. , 242 F. 3d 219, 222 ( 4t h Ci r . 2001) .
At t he out set , we addr ess whi ch par t y has t he bur den of
proof when soverei gn i mmuni t y under t he El eventh Amendment i s
r ai sed. Whi l e t he Supr eme Cour t has descr i bed sover ei gn
i mmuni t y as a j ur i sdi ct i onal bar t hat can be r ai sed f or t he
f i r st t i me on appeal , Semi nol e Tr i be of Fl a. v. Fl or i da, 517
U. S. 44, 73 ( 1996) , and a const i t ut i onal l i mi t at i on on t he
f eder al j udi ci al power est abl i shed i n Ar t . I I I , Pennhur st St at e
Sch. & Hosp. v. Hal der man, 465 U. S. 89, 98 ( 1984) , i t ha[ s] not
deci ded whet her El eventh Amendment i mmuni t y goes t o a court s
subj ect - mat t er j ur i sdi ct i on, Wi s. Dep t of Cor r . v. Schacht , 524
U. S. 381, 391 ( 1998) . Unl i ke subj ect - mat t er j ur i sdi ct i on, whi ch
cannot be wai ved, a St ate can al ways wai ve i t s i mmuni t y and
consent t o be sued i n f eder al cour t , At ascader o St at e Hosp. v.
Scanl on, 473 U. S. 234, 238 (1985) , and a cour t need not r ai se
t he i ssue on i t s own i ni t i at i ve, Wi s. Dep t of Cor r . , 524 U. S.
at 389. Because a def endant otherwi se pr otected by t he El event h
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Amendment can wai ve i t s pr ot ect i on, i t i s, as a pr act i cal
mat t er , st r uct ur al l y necessar y to r equi r e t he def endant t o
asser t t he i mmuni t y. We t heref ore concl ude t hat sover ei gn
i mmuni t y i s aki n t o an af f i r mat i ve def ense, whi ch t he def endant
bear s t he bur den of demonst r at i ng. I n so concl udi ng, we j oi n
ever y ot her cour t of appeal s that has addr essed t he i ssue. See
Woods v. Rondout Val l ey Cent . Sch. Di st . Bd. of Educ. , 466 F. 3d
232, 237- 39 ( 2d Ci r . 2006) ; Fr eseni us Med. Car e Car di ovascul ar
Res. , I nc. v. P. R. & t he Car i bbean Car di ovascul ar Ct r . Cor p. ,
322 F. 3d 56, 61 ( 1st Ci r . 2003) ; Gr agg v. Ky. Cabi net f or
Wor kf or ce Dev. , 289 F. 3d 958, 963 ( 6t h Ci r . 2002) ; Skel t on v.
Camp, 234 F. 3d 292, 297 ( 5t h Ci r . 2000) ; Chr i st y v. Pa. Tur npi ke
Comm n, 54 F. 3d 1140, 1144 ( 3d Ci r . 1995) ; Baxt er v. Vi go Cnt y.
Sch. Cor p. , 26 F. 3d 728, 734 n. 5 ( 7t h Ci r . 1994) , superseded by
st at ut e on ot her gr ounds as r ecogni zed i n Hol mes v. Mar i on Cnt y.
Of f i ce of Fami l y & Chi l dr en, 349 F. 3d 914, 918- 19 ( 7t h Ci r .
2003) ; I TSI TV Pr ods. , I nc. v. Agr i c. Ass ns, 3 F. 3d 1289, 1292
( 9t h Ci r . 1993) .
I n anal yzi ng whet her ent i t i es such as t he Ret i r ement Syst em
and t he Tr ust ar e ar ms of t he St at e, t he most i mpor t ant
consi der at i on i s whet her t he st at e t r easur y wi l l be r esponsi bl e
f or payi ng any j udgment t hat mi ght be awarded. Ram Di t t a, 822
F. 2d at 457. Thus, i f t he St at e t r easur y wi l l be cal l ed upon
t o pay a j udgment agai nst a government al ent i t y, t hen El event h
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Amendment i mmuni t y appl i es t o t hat ent i t y. Cash, 242 F. 3d
at 223. I f , on t he ot her hand, t he St at e t r easur y wi l l not be
l i abl e f or a j udgment , soverei gn i mmuni t y appl i es onl y wher e t he
gover nment al ent i t y i s so connect ed t o t he St at e t hat t he l egal
act i on agai nst t he ent i t y woul d, despi t e t he f act t hat t he
j udgment wi l l not be pai d f r om t he Stat e t r easur y, amount t o
t he i ndi gni t y of subj ect i ng a St at e t o t he coer ci ve pr ocess of
j udi ci al t r i bunal s at t he i nst ance of pr i vat e par t i es. I d.
at 224 ( quot i ng Semi nol e Tr i be, 517 U. S. at 58) . At bot t om,
even t hough st ate soverei gn i mmuni t y ser ves t he i mport ant
f unct i on of shi el di ng st at e t r easur i es and t hus pr eser vi ng t he
St at es abi l i t y to gover n i n accor dance wi t h t he wi l l of t hei r
ci t i zens, . . . t he doct r i ne s cent r al pur pose i s t o accor d t he
St at es t he r espect owed t hem as j oi nt sover ei gns. Fed.
Mar i t i me Comm n v. S. C. St at e Por t s Aut h. , 535 U. S. 743, 765
( 2002) ( i nt er nal quot at i on mar ks and ci t at i ons omi t t ed) .
A
We addr ess f i r st t he most i mpor t ant f act or - - whet her Sout h
Carol i na coul d be r esponsi bl e f or t he payment of a j udgment
agai nst t he Ret i r ement Syst em and t he Tr ust . A St at e t r easur y
i s r esponsi bl e wher e t he st at e i s f unct i onal l y l i abl e, even i f
not l egal l y l i abl e. U. S. ex r el . Ober g v. Pa. Hi gher Educ.
Assi st ance Agency, 745 F. 3d 131, 137 ( 4t h Ci r . 2014) ( quot i ng
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St oner v. Sant a Cl ar a Cnt y. Of f i ce of Educ. , 502 F. 3d 1116, 1122
( 9t h Ci r . 2007) ) ( i nt er nal quot at i on mar ks omi t t ed) ; see al so
Ri st ow v. S. C. Por t s Aut h. , 58 F. 3d 1051, 1053 ( 4t h Ci r . 1995)
( hol di ng t hat cour t s must [ c] onsi der [ ] t he pr act i cal ef f ect of
a put at i ve . . . j udgment on t he st at e t r easur y ( emphasi s
added) ) .
The pl ai nt i f f s ar gue t hat t he Ret i r ement Syst ems Act
i nsul at es t he st at e t r easur y f r om any j udgment ent er ed i n t hi s
case because i t pr ovi des t hat [ a] l l agr eement s or cont r act s
wi t h member s of t he Ret i r ement Syst em ar e sol el y obl i gat i ons
of t he i ndi vi dual pensi on pl an and t hat t he f ul l f ai t h and
credi t of Sout h Car ol i na or i t s subdi vi si ons i s not , and shal l
not be, pl edged or obl i gat ed beyond t he St at e s cont r i but i ons
as an empl oyer of par t i ci pat i ng empl oyees. S. C. Code Ann. 9-
1- 1690, 9- 11- 280.
Thi s st at utor y l anguage, however , must be r ead i n t he
cont ext of Ar t i cl e X, Sect i on 16 of t he Sout h Car ol i na
Const i t ut i on, whi ch pr ovi des t hat [ t ] he Gener al Assembl y shal l
annual l y appr opr i ate f unds and pr escr i be member cont r i but i ons
f or any st at e- oper at ed r et i r ement syst em whi ch wi l l i nsur e the
avai l abi l i t y of f unds t o meet al l nor mal and accr ued l i abi l i t y
of t he syst em on a sound act uar i al basi s as det er mi ned by t he
gover ni ng body of t he syst em. S. C. Const . ar t . X, 16
( emphasi s added) . Any possi bl e ambi gui t y r esul t i ng f r om r eadi ng
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t he r et i r ement l aws i n t he cont ext of t he Sout h Car ol i na
Const i t ut i on was put t o rest by t he Sout h Car ol i na Supr eme Cour t
i n Wehl e v. Sout h Carol i na Ret i r ement Syst em, 611 S. E. 2d 240,
242- 43 ( S. C. 2005) ( per cur i am) , wher e the Cour t st at ed t hat ,
shoul d t he Boar d det er mi ne that any ret i r ement syst em i s not
f unded on a sound actuar i al basi s, t he General Assembl y must
pr ovi de f undi ng necessar y t o r est or e t he f i scal i nt egr i t y of t he
Syst em. Thus, i n t he event t hat a j udgment i n t hi s case wer e
t o r ender t he Ret i r ement Syst em unabl e t o meet i t s l i abi l i t i es,
t he General Assembl y woul d be obl i gated t o account f or any
def i ci ency by i ncr easi ng appr opr i at i ons t o t he Ret i r ement Syst em
or by r equi r i ng empl oyer s, i ncl udi ng t he St at e i t sel f , t o
i ncrease t hei r cont r i but i ons.
I n addi t i on, t he St at e s ul t i mat e r esponsi bi l i t y f or t he
f i nanci al soundness of t he Ret i r ement System i s r ef l ect ed by the
f act t hat t he Ret i r ement Syst em s act uar i al val uat i on i s r el i ed
upon i n t he pr epar at i on of t he St at e s annual f i nanci al
st at ement and by out si de ent i t i es i n r at i ng t he St at e f or
pur poses of i ssuance of bonds. Wehl e, 611 S. E. 2d at 242.
Thus, i f a j udgment i n t hi s case wer e t o r ender t he Ret i r ement
Syst em or t he Tr ust i nsol vent , t hat i nsol vency woul d har m t he
St at e s cr edi t r at i ng, maki ng i t mor e expensi ve f or t he St at e t o
bor r ow money.
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Consequent l y, we concl ude that Sout h Carol i na remai ns
f unct i onal l y l i abl e f or any j udgment agai nst t he Ret i r ement
Syst em and t he Tr ust , whi ch i s suf f i ci ent t o make t he Ret i r ement
Syst em and t he Tr ust ar ms of t he St at e. See Ober g, 745 F. 3d
at 137.
We r ej ect t he pl ai nt i f f s var i ous ar gument s t o t he
cont r ar y. Fi r st , t hey i nsi st t hat Ar t i cl e X, Secti on 16 of t he
Sout h Car ol i na Const i t ut i on mer el y compel s t he St at e to compl y
wi t h i t s f undi ng obl i gat i ons as an empl oyer , a r equi r ement t hat
t he General Assembl y coul d not have i mposed on f ut ur e
l egi sl at ur es by l egi sl at i ve act . And t hey compl ai n t hat t he
Di st r i ct Cour t unnecessar i l y const r ued t he st at e Const i t ut i on i n
a manner t hat r ender ed i t i r r econci l abl e wi t h Sect i ons 9- 1- 1690
and 9- 11- 280. But t he Sout h Carol i na Supr eme Cour t , whi ch, of
cour se, has t he l ast word on t he meani ng of t he Sout h Carol i na
Const i t ut i on, r ej ected t he pl ai nt i f f s posi t ed const r ucti on of
Ar t i cl e X, Sect i on 16. See Wehl e, 611 S. E. 2d at 242- 43.
Mor eover , t he pl ai nt i f f s argument t hat we must const r ue a
const i t ut i onal pr ovi si on so as not t o conf l i ct wi t h a st at ut e
t ur ns t he concept of const i t ut i onal supr emacy on i t s head.
Second, t he pl ai nt i f f s mai nt ai n t hat t her e i s no evi dence
t hat a j udgment i n t hei r f avor woul d i n f act creat e a shor t f al l
i n t he Ret i r ement Syst em s f unds. Yet , gi ven t hat t he
pl ai nt i f f s compl ai nt al l eges t hat t he member s of t he pr oposed
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cl ass wi l l exceed t ens of t housands of per sons, i t i s sur el y
pl ausi bl e t hat a f avor abl e j udgment coul d cr eat e an act uar i al
def i ci t . More i mpor t ant l y, whet her or not a j udgment woul d
r ender t he Ret i r ement Syst em i nsol vent i s of l i t t l e consequence
t o t he anal ysi s. As t he Supr eme Cour t hel d i n Regent s of t he
Uni ver si t y of Cal i f or ni a v. Doe, 519 U. S. 425 ( 1997) , i t i s t he
ent i t y s pot ent i al l egal l i abi l i t y . . . t hat i s rel evant . I d.
at 431 ( emphasi s added) ; see al so Owens v. Bal t . Ci t y St at e s
At t ys Of f i ce, 767 F. 3d 379, 412 ( 4t h Ci r . 2014) ( When an
ent i t y has bot h st at e and l ocal char acter i st i cs, t he ent i t y s
pot ent i al l egal l i abi l i t y i s r el evant t o t he El event h Amendment
i nqui r y ( emphasi s added) ( quot i ng Regent s, 519 U. S. at 431) ) ;
Ober g, 745 F. 3d at 137 ( [ I ] n assessi ng [ t he St at e t r easur y]
f act or , an ent i t y s pot ent i al l egal l i abi l i t y i s key
( emphasi s added) ( quot i ng Regent s, 519 U. S. at 431) ) .
Consequent l y, t he pr oper i nqui r y i s not whet her t he st at e
t r easur y woul d be l i abl e i n t hi s case, but whet her ,
hypot het i cal l y speaki ng, t he st at e t r easur y woul d be subj ect t o
pot ent i al l egal l i abi l i t y i f t he ret i rement system di d not
have t he money t o cover t he j udgment . Er nst v. Ri si ng, 427
F. 3d 351, 362 ( 6t h Ci r . 2005) ( quot i ng Regent s, 519 U. S. at
431) ) ; see al so Pub. Sch. Ret . Sys. v. St at e St . Bank & Tr ust
Co. , 640 F. 3d 821, 830 ( 8t h Ci r . 2011) ( si mi l ar ) . Her e, as i n
Er nst , t he pl ai nt i f f s f ai l t o come t o gr i ps wi t h t he f i scal
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r eal i t y t hat t he St at e s f undi ng r equi r ement assur edl y coul d
i ncr ease i f t he r et i r ement system wer e t o use i t s cur r ent and
f ut ur e f undi ng t o pay of f a j udgment agai nst i t . 427 F. 3d
at 362 ( emphasi s added) .
Thi r d, t he pl ai nt i f f s r ead much i nto t he f act t hat t he
f unds and asset s of t he Ret i r ement Syst em are not f unds of t he
St at e, S. C. Code Ann. 9- 1- 1310( C) , but i nst ead ar e hel d i n a
gr oup t r ust under Sect i on 401( a) ( 24) of t he I nt er nal Revenue
Code, i d. 9- 16- 20( C) . Sect i on 401( a) ( 24) of t he I nt er nal
Revenue Code requi r es t hat gr oup t r ust f unds not be used f or ,
or di ver t ed t o, pur poses ot her t han f or t he excl usi ve benef i t
of . . . empl oyees or t hei r benef i ci ar i es i n or der t o qual i f y
as a gr oup t r ust . 26 U. S. C. 401( a) ( 24) . Whi l e we have
r ecogni zed t hat hol di ng f unds i n a segr egat ed account apar t f r om
gener al st at e f unds does counsel [ ] agai nst est abl i shi ng ar m- of -
t he- st at e st at us, Ober g, 745 F. 3d at 139, t hat f act i s not
di sposi t i ve. The pl ai nt i f f s al so ar gue t hat Sout h Car ol i na i s
vi ol at i ng 401( a) ( 24) by di ver t i ng t he cont r i but i ons t hey made
t o t he Ret i r ement Syst em t o benef i t pr e- r et i r ement empl oyees.
But even i f Sout h Car ol i na wer e i ndeed i n vi ol at i on of f eder al
l aw by usi ng f unds cont r ar y t o 401( a) ( 24) , t hat f act woul d be
i r r el evant t o whet her a j udgment agai nst t he Ret i r ement Syst em
or t he Tr ust coul d pot ent i al l y af f ect t he St at e t r easur y.
Accor d Er nst , 427 F. 3d at 365.
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Four t h, t he pl ai nt i f f s ar gue t hat cour t s gener al l y, and t he
di st r i ct cour t i n par t i cul ar , shoul d wai t unt i l t he compl et i on
of di scover y and t he devel opment of a f act ual r ecor d bef or e
r esol vi ng t he sover ei gn i mmuni t y i ssue. But we have of t en
af f i r med Rul e 12( b) ( 6) mot i ons t o di smi ss on t he basi s of
El event h Amendment i mmuni t y. See, e. g. , Ant r i can v. Odom, 290
F. 3d 178, 191 ( 4t h Ci r . 2002) . I n Gr ay v. Laws, 51 F. 3d 426,
434 ( 4t h Ci r . 1995) , upon whi ch t he pl ai nt i f f s r el y f or t hei r
ar gument , we vacat ed t he di st r i ct cour t s di smi ssal under t he
El event h Amendment not because the di st r i ct cour t f ai l ed t o
conduct suf f i ci ent f act f i ndi ng, but r at her because t he Supr eme
Cour t had changed t he appl i cabl e El eventh Amendment st andar d
whi l e t he appeal was pendi ng and t he barr enness of t he recor d
r ender ed us i l l - sui t ed t o appl y t he new st andar d.
Fi nal l y, t he pl ai nt i f f s cont end t hat we ar e bound by our
ear l i er deci si on i n Al mond v. Boyl es, 792 F. 2d 451 ( 4t h Ci r .
1986) . I n Al mond, we r ej ect ed, f or t he r easons st at ed by t he
di st r i ct cour t , a cl ai m t hat t he El event h Amendment bar r ed a
sui t by a cl ass of vi sual l y handi capped oper at or s of vendi ng
st ands t o r ecover empl oyer cont r i but i ons t o t he Nor t h Car ol i na
Teacher s and Stat e Empl oyees Ret i r ement Syst em, whi ch t hey
cl ai med wer e col l ect ed i n vi ol at i on of f eder al l aw. I d. at 456.
The di st r i ct cour t had f ound t hat a j udgment agai nst t he
r et i r ement system woul d not come f r om St at e f unds f or t hr ee
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r easons, t he most i mpor t ant [ ] of whi ch was t hat t he
def endant s [ had] not shown t he cour t t hat t he rel i ef r equest ed
by t he pl ai nt i f f s woul d i nevi t abl y l ead t o an addi t i onal
appr opr i at i on of st at e f unds. Al mond v. Boyl es, 612 F. Supp.
223, 228 ( E. D. N. C. 1985) ( emphasi s added) . But Al mond s
r equi r ement t hat t he def endant s show t hat a j udgment woul d
i nevi t abl y be sat i sf i ed by t he St at e i s f undament al l y at odds
wi t h Regent s subsequent l ess demandi ng st andar d of potent i al
l i abi l i t y, and t her ef or e Al mond s f r amewor k i s no l onger
appl i cabl e.
As t he Supreme Cour t has f r amed the El eventh Amendment
i nqui r y, t he quest i on i s whet her , [ i ] f t he expendi t ur es of t he
ent er pr i se exceed r ecei pt s, i s t he St at e i n f act obl i gat ed t o
bear and pay t he r esul t i ng i ndebt edness of t he ent erpr i se? When
t he answer i s No - - bot h l egal l y and pr act i cal l y - - t hen t he
El event h Amendment s core concern i s not i mpl i cated. Hess v.
Por t Aut h. Tr ans- Hudson Cor p. , 513 U. S. 30, 51 ( 1994) ( emphasi s
added) . I n l i ght of Wehl e s i nt er pr et at i on of Ar t i cl e X,
Sect i on 16, t he answer t o t hat quest i on her e i s undoubt edl y yes,
and we t heref ore concl ude t hat a j udgment agai nst t he Ret i r ement
Syst em and t he Tr ust woul d i mpl i cat e Sout h Car ol i na s t r easur y.
B
I n addi t i on t o Sout h Car ol i na s pot ent i al f undi ng
obl i gat i on, we al so concl ude t hat st at e- di gni t y f act or s wei gh i n
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f avor of f i ndi ng t hat t he Ret i r ement Syst em and t he Tr ust ar e
arms of t he St ate. See Fed. Mar i t i me Comm n, 535 U. S. at 765.
When assessi ng whet her al l owi ng sui t agai nst a st at e ent i t y
woul d of f end a St at e s di gni t y, we consi der ( 1) t he degr ee of
cont r ol t hat t he St at e exer ci ses over t he ent i t y or t he degr ee
of aut onomy f r om t he St at e t hat t he ent i t y enj oys; ( 2) t he scope
of t he ent i t y s concer ns - - whet her l ocal or st at ewi de - - wi t h
whi ch t he ent i t y i s i nvol ved; and ( 3) t he manner i n whi ch St at e
l aw t r eat s t he ent i t y. Cash, 242 F. 3d at 224.
Under t he degr ee- of - st at e- cont r ol f act or , we consi der who
appoi nt s t he ent i t y s di r ect or s or of f i cer s, who f unds t he
ent i t y, and whet her t he St at e r et ai ns a vet o over t he ent i t y s
act i ons, Ober g, 745 F. 3d at 137 ( quot i ng U. S. ex rel . Ober g v.
Ky. Hi gher Educ. St udent Loan Corp. , 681 F. 3d 575, 580 ( 4t h Ci r .
2012) ) ( i nt er nal quot at i on mar ks omi t t ed) , as wel l as whet her
an ent i t y has t he abi l i t y to cont r act , sue and be sued, and
pur chase and sel l pr oper t y, and whet her i t i s r epr esent ed i n
l egal mat t er s by the st at e at t or ney gener al , i d. ( ci t at i ons
omi t t ed) .
I n t hi s case, t he Ret i r ement Syst em does have t he power
and pr i vi l eges of a cor por at i on, S. C. Code. Ann. 9- 1- 20, 9-
11- 20, i ncl udi ng the powers t o sue and be sued, t o make
cont r act s, and t o buy and sel l pr oper t y, i d. 33- 3- 102. But ,
cont r ar y to t he pl ai nt i f f s ar gument , t he desi gnat i on of an
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ent i t y as a cor por at i on wi t h t he power t o sue and be sued i s not
concl usi ve i n est abl i shi ng i t s aut onomy. See Ober g, 745 F. 3d
at 139 ( f i ndi ng that t he aut onomy f act or cut bot h ways, even
t hough t he ent i t y had t he power t o ent er i nt o cont r act s, sue
and be sued, and pur chase and sel l pr opert y i n i t s own name) ;
see al so St ate Hi ghway Comm n v. Ut ah Const . Co. , 278 U. S. 194,
199 ( 1929) ( I t i s unnecessary f or us t o consi der t he ef f ect of
t he gener al gr ant of power t o sue or be sued . . . - - t hi s sui t ,
i n ef f ect , i s agai nst t he st at e and must be so t r eat ed) .
And ot her f act or s poi nt t o st at e cont r ol . The means by
whi ch t he ent i t i es of f i cer s ar e appoi nt ed suggest t hat t he
Ret i r ement Syst em i s behol den t o t he St at e. The St at e Budget
and Cont r ol Board and t he Publ i c Empl oyee Benef i t Aut hor i t y,
whi ch ar e the co- t r ust ees of t he Ret i r ement Syst em, and the
Ret i r ement Syst em I nvest ment Commi ssi on, whi ch has excl usi ve
aut hor i t y t o i nvest t he Tr ust s asset s, see S. C. Code Ann. 9-
16- 20( A) , ar e compr i sed al most ent i r el y of t he Gover nor of Sout h
Car ol i na, t he St at e Tr easur er , t he Compt r ol l er Gener al , t he
Chai r man of t he Senate Fi nance Commi t t ee, t he Chai r man of t he
House Ways and Means Commi t t ee, t he Pr esi dent Pr o Tempor e of t he
Senate, t he Speaker of t he House of Repr esent at i ves, and persons
appoi nt ed by t hese of f i ci al s. I d. 1- 11- 10, 9- 4- 10( B) ( 1) , 9-
16- 315( A) . Al t hough sever al of t he appoi nt ees ar e r equi r ed t o
be part i ci pant s i n t he Ret i r ement Syst em, even t hose members are
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sel ect ed by st at e of f i ci al s. Whi l e t he t r ust ees and
admi ni st r at or s of t he Tr ust ar e, of cour se, r equi r ed t o
di schar ge t hei r f i duci ar y dut i es sol el y i n t he i nt er est of t he
r et i r ement syst ems, par t i ci pant s, and benef i ci ar i es, i d. 9-
16- 40, one woul d have to be nai ve t o concl ude that t he St ate
l acks any i nf l uence or cont r ol when i t has t he power of
appoi nt ment . St at e cont r ol i s f ur t her evi denced by t he f act s
t hat : ( 1) t he St at e Tr easur er i s t he cust odi an of t he Tr ust s
f unds and has sol e aut hor i t y to i ssue payment s f r om t he f unds,
i d. 9- 1- 1320, 9- 11- 250; ( 2) t he Ret i r ement Syst em I nvest ment
Commi ss i on must pr ovi de quar t er l y r eport s t o, among others, t he
Speaker of t he House of Repr esent at i ves and t he Presi dent Pro
Tempor e of t he Senat e, i d. 9- 16- 90( A) ; ( 3) t he Stat e must
def end and i ndemni f y t he member s of t he Ret i r ement Syst em
I nvest ment Commi ssi on, i d. 9- 16- 370; and ( 4) an ent i r e t i t l e
of t he Code of Laws of Sout h Car ol i na i s devot ed t o t he
extensi ve r egul at i on of t he Ret i r ement Syst em and t he Tr ust .
I n sum, because of t he mi xed i ndi cat i ons as t o cont r ol , we
concl ude t hat appl i cat i on of t he cont r ol f actor , i f not f avor i ng
sover ei gn i mmuni t y, i s i nconcl usi ve. Accor d Ober g, 745 F. 3d at
141 ( f i ndi ng t hat t he cont r ol f act or pr esent [ ed] a cl ose
quest i on i n l i ght of t he f act t hat t he boar d of di r ect or s was
l ar gel y composed of st at e of f i ci al s or guber nat or i al
appoi nt ees but al so exer ci se[d] cor por at e power s i ncl udi ng t he
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capaci t y t o cont r act and sue and be sued) ; Al mond, 612 F. Supp.
at 227 ( hol di ng t hat t he cont r ol f act or di d not wei gh heavi l y
i n f avor of ei t her par t y, af t er not i ng t he det ai l ed st at ut or y
r egi me, t he pol i t i cal natur e of t he appoi nt ment of t he member s
of t he boar d of t r ust ees, t he r et i r ement syst em s cor por at e
st atus, and the boar d s powers t o sue and be sued and to buy and
sel l pr oper t y) .
Turni ng t o t he f act or consi der i ng whet her t he ent i t i es
concer ns are l ocal or st at ewi de, we concl ude t hat t hi s f act or
counsel s i n f avor of sover ei gn i mmuni t y. I n assessi ng t hi s
f act or , cour t s must consi der whet her t he ent i t y has st at ewi de or
l ocal i zed j ur i sdi ct i on, Cash, 242 F. 3d at 226, and whet her an
ent i t y s f unct i ons ar e cl assi f i ed as t ypi cal l y st at e or
unquest i onabl y l ocal , Har t er v. Ver non, 101 F. 3d 334, 341 ( 4t h
Ci r . 1996) ( quot i ng Hess, 513 U. S. at 45) . The Ret i r ement
Syst em cover s publ i c empl oyees thr oughout t he St at e. And l i ke
educat i ng t he [ St at e s] yout h, Md. St adi um Aut h. v. El l er be
Becket , I nc. , 407 F. 3d 255, 265 ( 4t h Ci r . 2005) , pr ovi di ng f or
publ i c empl oyees - - many of whom wor k f or t he St at e - - upon
r et i r ement i s an ar ea of st at ewi de concer n. Accor d Pub. Sch.
Ret . Sys. , 640 F. 3d at 829 ( [ T]he Ret i r ement Syst ems do not
f ur ni sh t he t ype of l ocal ser vi ces t hat pol i t i cal subdi vi si ons
t ypi cal l y f ur ni sh, such as wat er ser vi ce, f l ood cont r ol , [ or ]
r ubbi sh di sposal ( quot i ng Moor v. Cnt y. of Al ameda, 411 U. S.
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693, 720 ( 1973) ) ) ; Er nst , 427 F. 3d at 361 ( [ W] hen, as i n t hi s
case, t he ret i r ement system i s f unded by annual appr opr i at i ons
f r om t he st at e l egi sl at ur e, oper at es i n par t t hr ough t he
Mi chi gan Tr easury and i n par t t hr ough t he St at e s Depar t ment of
Management and Budget , operat es on a st at ewi de basi s and
serves . . . st at e- wi de of f i ci al s , i t i s f ai r t o say t hat t he
r et i r ement syst em per f or ms a tr adi t i onal st at e f uncti on) ;
McGi nt y v. New Yor k, 251 F. 3d 84, 98 ( 2d Ci r . 2001) ( Al t hough
t he Ret i r ement Syst em does not servi ce st at e empl oyees
excl usi vel y, i t assi st s i n t he busi ness of t he st at e by enabl i ng
t he st at e t o meet i t s pensi on and benef i t s obl i gat i ons . . . ) .
Fi nal l y, t he f act or assessi ng how Sout h Car ol i na t r eat s t he
ent i t i es poi nt s st r ongl y i n f avor of sover ei gn i mmuni t y. Thi s
f act or r equi r es cour t s t o consi der t he r el evant st at e st at ut es,
r egul at i ons, and const i t ut i onal pr ovi si ons whi ch char act er i ze
t he ent i t y, and t he hol di ngs of st at e cour t s on t he quest i on.
Har t er , 101 F. 3d at 342. Ti t l e 9 of t he Code of Laws of Sout h
Car ol i na r epeat edl y uses t he t er m St at e agency t o ref er t o the
Sout h Car ol i na Ret i r ement Syst em and t he t er m St at e agent t o
r ef er t o t he Di r ect or of t he Ret i r ement Syst em. S. C. Code Ann.
9- 3- 20( 4) , 9- 5- 30( 5) t o 30( 6) . The Code al so descr i bes t he
Sout h Car ol i na Publ i c Empl oyee Benef i t Aut hor i t y as an
admi ni st r at i ve agency of s t at e gover nment . I d. 9- 4- 10( H) .
Si mi l ar l y, i n Layman, t he Sout h Car ol i na Supr eme Cour t
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char act er i zed t he Ret i r ement Syst em as a st at e agency f or
pur poses of S. C. Code Ann. 15- 77- 300, whi ch permi t s an award
of at t or neys f ees t o t he pr evai l i ng par t y i n an act i on br ought
by or agai nst t he St at e or any pol i t i cal subdi vi si on t her eof .
658 S. E. 2d at 326. And i n Ahr ens, t he Cour t anal yzed whether ,
as an agency, t he Ret i r ement Syst em cr eat ed a cont r act wi t h
t he wor ki ng r et i r ees. 709 S. E. 2d at 5860. I ndeed, Sout h
Car ol i na cour t s have f r equent l y ref er r ed t o t he i ndi vi dual
pensi on pl ans of t he Ret i r ement Syst em as agenci es. See, e. g. ,
Kennedy v. S. C. Ret . Sys. , 549 S. E. 2d 243, 251 ( S. C. 2001) ; S. C.
Pol i ce Of f i cer s Ret . Sys. v. Ci t y of Spar t anbur g, 391 S. E. 2d
239, 241 ( S. C. 1990) .
At bot t om, we concl ude t hat t he r el evant i ndi cat or s
st r ongl y i ndi cat e that t he Ret i r ement Syst em and t he Tr ust ar e
ar ms of t he St at e of Sout h Car ol i na and ar e t her ef or e pr otect ed
under t he El event h Amendment . Thi s concl usi on i s consi st ent
wi t h t he hol di ngs of t he over whel mi ng number of f eder al cour t s
t hat have hel d t hat si mi l ar r et i r ement syst ems i n ot her St at es
ar e ar ms of t he St at e. See Pub. Sch. Ret . Sys. , 640 F. 3d
at 82733; Er nst , 427 F. 3d at 35966; McGi nt y, 251 F. 3d at 100;
Mo. St at e Empl oyees Ret . Sys. v. Cr edi t Sui sse, N. Y. Br anch,
No. 094224CVCNKL, 2010 WL 318652, at *6 (W. D. Mo. J an. 21,
2010) ; N. M. ex r el . Nat l Educ. Ass n of N. M. v. Aust i n Capi t al
Mgmt . Lt d. , 671 F. Supp. 2d 1248, 1253 ( D. N. M. 2009) ; Cal . Pub.
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Emps. Ret . Sys. v. Moody s Corp. , Nos. C 0903628 SI , C 0903629
J CS, 2009 WL 3809816, at *6 ( N. D. Cal . Nov. 10, 2009) ; Tur ner v.
I nd. Teachers Ret . Fund, No. 1: 07cv1637DFHJ MS, 2008 WL
2324114, at *1 ( S. D. I nd. J une 5, 2008) ; Lar sen v. St at e
Empl oyees Ret . Sys. , 553 F. Supp. 2d 403, 420 ( M. D. Pa. 2008) ;
J MB Gr p. Tr ust I V v. Pa. Mun. Ret . Sys. , 986 F. Supp. 534, 538
( N. D. I l l . 1997) ; Scul t hor pe v. Va. Ret . Sys. , 952 F. Supp. 307,
30910 ( E. D. Va. 1997) ; Hai r v. Tenn. Consol . Ret . Sys. , 790 F.
Supp. 1358, 1364 ( M. D. Tenn. 1992) ; Mel l o v. Woodhouse, 755 F.
Supp. 923, 930 ( D. Nev. 1991) ; Rei ger v. Kan. Pub. Emps. Ret .
Sys. , 755 F. Supp. 360, 361 ( D. Kan. 1990) ; Ret i r ed Pub.
Empl oyees Ass n of Cal . , Chapt er 22 v. Cal i f or ni a, 614 F. Supp.
571, 573, 581 ( N. D. Cal . 1984) ; Uni t ed St at es v. Sout h Car ol i na,
445 F. Supp. 1094, 10991100 ( D. S. C. 1977) ; 21 Pr ops. , I nc. v.
Romney, 360 F. Supp. 1322, 1326 (N. D. Tex. 1973) .
I I I
Turni ng t o t he cl ai ms agai nst t he st at e of f i ci al s, t he
pl ai nt i f f s al l eged i n t hei r compl ai nt t hat [ a] s a r esul t of
Def endant s deducti on f r om [ Pl ai nt i f f s ] ear ni ngs, Pl ai nt i f f s
and t he cl ass have suf f er ed and wi l l cont i nue t o suf f er
i r r epar abl e and i mmedi at e har m and i nj ur y t o t hei r pr oper t y and
r i ght s under t he l aws and Const i t ut i on of t he Uni t ed St at es.
Accor di ngl y, t hey r equest ed, among ot her r el i ef , i nj unct i ons
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( 1) compel l i ng Def endant s t o i mmedi at el y r et ur n t o Pl ai nt i f f s
and the cl ass al l moni es Def endant s have deduct ed as
cont r i but i ons t o t he Ret i r ement Syst ems s i nce J ul y 1, 2005, and
( 2) pr event i ng f or al l t i me enf or cement of [ t he 2005 Act ] .
The pl ai nt i f f s cont end t hat t hei r r equest s f or i nj unct i ve r el i ef
agai nst t he st at e of f i ci al s are except ed f r om El event h Amendment
pr ot ect i on under Ex par t e Young.
Fi r st , we i nt er pr et t he pl ai nt i f f s r equest f or an
i nj unct i on compel l i ng t he ret ur n of al l moni es Def endant s have
deduct ed as cont r i but i ons t o t he Ret i r ement Syst ems as a cl ai m
f or money damages. St at e of f i ci al s sued i n t hei r of f i ci al
capaci t i es f or r et r ospect i ve money damages have the same
soverei gn i mmuni t y accorded t o t he St ate. See Buckhannon Bd. &
Care Home, I nc. v. W. Va. Dep t of Heal t h & Human Res. , 532 U. S.
598, 609 n. 10 ( 2001) ; Edel man v. J ordan, 415 U. S. 651 ( 1974) ;
Mar t i n v. Wood, ___ F. 3d ___, No. 13- 2283 ( 4t h Ci r . Nov. 18,
2014) . Ther ef or e, as di d t he di st r i ct cour t , we hol d t hat t he
pl ai nt i f f s cl ai m agai nst t he stat e of f i ci al s f or t he ret urn of
t hei r cont r i but i ons i s barr ed by the El event h Amendment .
Second, we agr ee wi t h pl ai nt i f f s t hat t hei r cl ai m f or t he
second i nj unct i on - - t o pr event f or al l t i me t he enf or cement
of t he 2005 Act - - i s prospect i ve and seeks t o r emedy an ongoi ng
vi ol at i on of f eder al l aw. See Ver i zon Md. , I nc. v. Pub. Ser v.
Comm n, 535 U. S. 635, 645 ( 2002) ( I n determi ni ng whet her t he
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doct r i ne of Ex par t e Young avoi ds an El event h Amendment bar t o
sui t , a cour t need onl y conduct a st r ai ght f or war d i nqui r y i nt o
whet her [ t he] Compl ai nt [ 1] al l eges an ongoi ng vi ol at i on of
f eder al l aw and [2] seeks r el i ef pr oper l y char act er i zed as
pr ospecti ve ( f i r st al t er at i on i n or i gi nal ) ( quot i ng Coeur
d Al ene Tr i be, 521 U. S. at 296 ( O Connor , J . , concur r i ng i n par t
and concur r i ng i n t he j udgment ) ) ) ; see al so Va. Of f i ce f or
Prot ect i on & Advocacy v. St ewar t , 131 S. Ct . 1632, 1639 ( 2011) ;
Const ant i ne v. Rect ors & Vi si t or s of Geor ge Mason Uni v. , 411
F. 3d 474, 496 ( 4t h Ci r . 2005) .
Nonet hel ess, f or a reason suppor t ed by t he recor d but not
r el i ed on by t he di st r i ct cour t , we concl ude t hat t he di st r i ct
cour t was al so cor r ect i n di smi ssi ng t he cl ai m seeki ng t he
second i nj unct i on agai nst st at e of f i ci al s. See Gr eenhouse v.
MCG Capi t al Corp. , 392 F. 3d 650, 660 ( 4t h Ci r . 2004) ( [ W] e may
af f i r m t he di smi ssal by t he di st r i ct cour t upon t he basi s of any
gr ound suppor t ed by the r ecor d even i f i t i s not t he basi s
r el i ed upon by t he di st r i ct cour t ( quot i ng Ost r zenski v.
Sei gel , 177 F. 3d 245, 253 ( 4t h Ci r . 1999) ) ) .
The Ex par t e Young except i on t o El event h Amendment i mmuni t y
appl i es onl y wher e a par t y def endant i n a sui t t o enj oi n t he
enf or cement of an act al l eged t o be unconst i t ut i onal has some
connect i on wi t h t he enf or cement of t he act . 209 U. S. at 157;
see al so S. C. Wi l dl i f e Fed n v. Li mehouse, 549 F. 3d 324, 333
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( 4t h Ci r . 2008) ; Lyt l e v. Gr i f f i t h, 240 F. 3d 404, 410 ( 4t h Ci r .
2001) . Thus, we have hel d t hat a gover nor cannot be enj oi ned by
vi r t ue of hi s gener al dut y to enf or ce t he l aws, Wast e Mgmt .
Hol di ngs, I nc. v. Gi l mor e, 252 F. 3d 316, 331 ( 4t h Ci r . 2001) ,
and t hat an at t orney general cannot be enj oi ned where he has no
speci f i c st at ut or y aut hor i t y t o enf or ce t he st at ut e at i ssue,
McBur ney v. Cucci nel l i , 616 F. 3d 393, 400 ( 4t h Ci r . 2010) . I n
cont r ast , we have hel d t hat a ci r cui t cour t cl er k bor e t he
r equi si t e connect i on t o t he enf or cement of st at e mar r i age l aws
t o be enj oi ned f r om enf or ci ng t hem, because the cl er k was
r esponsi bl e f or gr ant i ng and denyi ng appl i cat i ons f or mar r i age
l i censes. See Bost i c v. Schaef er , 760 F. 3d 352, 371 n. 3 ( 4t h
Ci r . ) , cer t . deni ed, 135 S. Ct . 308 ( 2014) .
The r equi r ement t hat t her e be a r el at i onshi p bet ween t he
st at e of f i ci al s sought t o be enj oi ned and t he enf or cement of t he
st at e st at ut e pr event s par t i es f r om ci r cumvent i ng a St at e s
El event h Amendment i mmuni t y. See McBur ney, 616 F. 3d at 399;
Lyt l e, 240 F. 3d at 412 ( Wi l ki nson, C. J . , di ssent i ng) . As t he
Cour t expl ai ned i n Ex par t e Young, i f t he const i t ut i onal i t y of
ever y act passed by the l egi sl at ur e coul d be t est ed by a sui t
agai nst t he governor and at t orney general , based upon t he theor y
t hat t he f or mer , as t he execut i ve of t he St at e, was, i n a
gener al sense, char ged wi t h t he execut i on of al l i t s l aws, and
t he l at t er , as at t or ney gener al , mi ght r epr esent t he st at e i n
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l i t i gat i on i nvol vi ng t he enf or cement of i t s st at ut es, i t woul d
evi scer at e t he f undament al pr i nci pl e t hat [ St at es] cannot ,
wi t hout t hei r assent , be br ought i nt o any cour t at t he sui t of
pr i vat e per sons. 209 U. S. at 157 ( quot i ng Fi t t s v. McGhee, 172
U. S. 516, 530 ( 1899) ) .
I n t hi s case, t he pl ai nt i f f s named as def endant s member s of
t he St at e Budget and Cont r ol Boar d, t he Execut i ve Di r ect or of
t he St at e Budget and Cont r ol Boar d, and t he Execut i ve Di r ect or
of t he Publ i c Empl oyee Benef i t Aut hor i t y, seeki ng t o enj oi n t hem
f r om deduct i ng f r om t he pl ai nt i f f s paychecks the cont r i but i ons
mandat ed by t he 2005 Act . The Stat e Budget and Cont r ol Boar d
and t he Publ i c Empl oyee Benef i t Aut hor i t y ser ve as co- t r ust ees
of t he Ret i r ement Syst em, S. C. Code Ann. 9- 1- 1310, and Sout h
Car ol i na l aw vest s gener al admi ni st r at i on and r esponsi bi l i t y
f or t he pr oper oper at i on of t he Ret i r ement Syst em i n t he Publ i c
Empl oyee Benef i t Aut hor i t y, i d. 9- 1- 210, 9- 11- 30. But
nei t her t he St ate Budget and Cont r ol Boar d nor t he Publ i c
Empl oyee Benef i t Aut hor i t y has r esponsi bi l i t y f or ensur i ng t hat
empl oyee cont r i but i ons t o t he Ret i r ement Syst em be deduct ed f r om
t he empl oyees paychecks and t r ansmi t t ed t o t he Ret i r ement
Syst em. Empl oyers of cover ed empl oyees ar e r equi r ed t o deduct
t he requi si t e cont r i but i ons f r om t he empl oyees paychecks and
f ur ni sh t he wi t hhel d amount s t o t he Ret i r ement Syst em, and any
per son who f ai l s t o r emi t wi t hhel d cont r i but i ons t o t he
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Ret i r ement Syst em i s gui l t y of a mi sdemeanor and must be
puni shed by f i ne or i mpr i sonment , or bot h. I d. 9- 11- 210( 7) ;
see al so i d. 9- 1- 1160( A) . The Code of Laws of Sout h Car ol i na
nowher e gi ves t he Ret i r ement Syst em, t he Tr ust , or t he t r ust ees
and admi ni st r at or s of t he Ret i r ement Syst em t he aut hor i t y to
deduct or r ef use to deduct f unds f r om par t i ci pat i ng empl oyees
paychecks or t o pr osecut e empl oyer s who vi ol at e t hei r dut i es.
I nst ead, t he r ol e of t he st at e of f i ci al s named i n t he compl ai nt
i s mer el y to wai t passi vel y f or t he f unds t o be t r ansmi t t ed t o
t he Ret i r ement Syst em and, once t he f unds have ar r i ved, t o
manage and i nvest t hem. As such, t he compl ai nt seeks t o enj oi n
t he Ret i r ement Syst em s t r ust ees and admi ni st r at or s f r om
par t i ci pat i ng i n a pr ocess i n whi ch t hey act ual l y have no r ol e.
Because t he st ate of f i ci al s named as def endant s have no
connect i on wi t h t he enf or cement of t he 2005 Act - - speci f i cal l y
S. C. Code Ann. 9- 1- 1790( C) and 9- 11- 90( 4) ( c) - - we hol d t hat
t he Ex part e Young except i on does not appl y and t hat t he st ate
of f i ci al s are thus ent i t l ed t o El event h Amendment i mmuni t y on
t he cl ai ms seeki ng pr ospect i ve i nj unct i ve rel i ef .
I V
The pl ai nt i f f s cont end t hat not wi t hst andi ng any El event h
Amendment pr otect i on t o whi ch the def endant s may be ent i t l ed,
sover ei gn i mmuni t y never bar s a const i t ut i onal t aki ngs cl ai m.
They mai ntai n t hat t he Taki ngs Cl ause provi des an absol ute
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guar ant ee of j ust compensat i on when pr i vat e pr oper t y i s t aken
f or publ i c use and ar gue that i f t he St at es wer e i mmune f r om
t aki ngs cl ai ms i n f eder al cour t , t he Fi f t h Amendment woul d be
ef f ect i vel y abr ogated by the El event h Amendment .
I t i s t r ue that under t he El event h Amendment , St at es enj oy
sover ei gn i mmuni t y except where t here has been a surr ender of
t hi s i mmuni t y i n t he pl an of t he convent i on. Coeur d Al ene
Tr i be of I daho, 521 U. S. at 267 ( quot i ng Pr i nci pal i t y of Monaco
v. Mi ssi ssi ppi , 292 U. S. 313, 322- 23 ( 1934) ) . But t he Supr eme
Cour t has r ecogni zed t hat t he pl an of t he convent i on or t he
St ates t hemsel ves have sur r endered sover ei gn i mmuni t y i n onl y
si x cont exts: ( 1) when a St at e consent s t o sui t ; ( 2) when a case
i s br ought by t he Uni t ed St at es or anot her St at e; ( 3) when
Congr ess abr ogates soverei gn i mmuni t y pur suant t o Sect i on 5 of
t he Four t eent h Amendment or pursuant t o t he Bankr upt cy Cl ause;
( 4) when a sui t i s br ought agai nst an ent i t y t hat i s not an ar m
of t he St at e; ( 5) when a pr i vat e par t y sues a st at e of f i ci al i n
hi s of f i ci al capaci t y to pr event an ongoi ng vi ol at i on of f eder al
l aw; and ( 6) when an i ndi vi dual sues a st at e of f i ci al i n hi s
i ndi vi dual capaci t y f or ul t r a vi r es conduct . See S. C. St at e
Por t s Aut h. v. Fed. Mar i t i me Comm n, 243 F. 3d 165, 176- 77 ( 4t h
Ci r . 2001) , af f d, 535 U. S. 743 ( 2002) . The pl ai nt i f f s now
i nvi t e us t o r ecogni ze a sevent h except i on f or cl ai ms br ought
under t he Taki ngs Cl ause of t he Fi f t h Amendment .
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The Fi f t h Amendment provi des t hat pr i vat e proper t y [ shal l
not ] be taken f or publ i c use, wi t hout j ust compensat i on, U. S.
Const . amend. V, and t he El event h Amendment pr ovi des t hat [ t ] he
j udi ci al power of t he Uni t ed Stat es shal l not be const r ued t o
ext end t o any sui t . . . , commenced or pr osecut ed agai nst one
of t he Uni t ed St at es by ci t i zens of t hat St at e or anot her
St at e, i d. amend. XI . Whi l e t her e i s ar guabl y some t ensi on
between t he pr otect i ons of t hese amendment s, t hat t ensi on i s not
i r r econci l abl e.
J ust as t he Const i t ut i on guar antees t he payment of j ust
compensat i on f or a taki ng, so t oo does t he Due Pr ocess Cl ause
pr ovi de t he r i ght t o a r emedy f or t axes col l ect ed i n vi ol at i on
of f eder al l aw. See, e. g. , McKesson Cor p. v. Di v. of Al cohol i c
Beverages & Tobacco, 496 U. S. 18, 51 ( 1990) . But despi t e t he
const i t ut i onal r equi r ement t hat t here be a r emedy, t he Supr eme
Cour t expr essl y not ed i n Rei ch v. Col l i ns, 513 U. S. 106 ( 1994) ,
t hat t he sover ei gn i mmuni t y [ t hat ] St at es enj oy i n f eder al
cour t , under t he El event h Amendment , does general l y bar t ax
r ef und cl ai ms f r om bei ng br ought i n t hat f or um. I d. at 110
( second emphasi s added) . To ensur e t hat t axpayers possess an
avenue f or r el i ef , t he Cour t hel d t hat st at e cour t s must hear
sui t s t o r ecover t axes unl awf ul l y exact ed, t he sover ei gn
i mmuni t y [ t hat ] St at es t r adi t i onal l y enj oy i n t hei r own cour t s
not wi t hst andi ng. I d. ; cf . Al den v. Mai ne, 527 U. S. 706, 740
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( 1999) ( hol di ng t hat Congr ess cannot subj ect St at es t o sui t s i n
st at e cour t s but t aki ng car e not t o over r ul e Rei ch) . Reasoni ng
anal ogousl y, we concl ude t hat t he El event h Amendment bars Fi f t h
Amendment t aki ng cl ai ms agai nst St ates i n f ederal cour t when t he
St at e s cour t s r emai n open t o adj udi cat e such cl ai ms.
Sout h Car ol i na cour t s have l ong r ecogni zed a r i ght of
per sons t o sue t he St at e f or unconst i t ut i onal t aki ngs. See
Gr aham v. Char l est on Cnt y. Sch. Bd. , 204 S. E. 2d 384, 386 ( S. C.
1974) ( I n t hi s j ur i sdi ct i on nei t her t he St at e nor any of i t s
pol i t i cal subdi vi si ons i s l i abl e i n an acti on ex del i cto unl ess
by expr ess enact ment of t he General Assembl y, except where t he
act s compl ai ned of , i n ef f ect , const i t ut e a t aki ng of pr i vat e
pr oper t y f or publ i c use wi t hout j ust compensat i on ( emphasi s
added) ) , over r ul ed on ot her gr ounds by McCal l v. Bat son, 329
S. E. 2d 741 ( S. C. 1985) . Because t he pl ai nt i f f s can have t hei r
t aki ngs cl ai ms hear d i n Sout h Car ol i na st at e cour t s, t he
El event h Amendment does not r ender t he Taki ngs Cl ause an empty
pr omi se. But i n concl udi ng t hat t he Fi f t h Amendment Taki ngs
Cl ause does not , i n t hi s case, t r ump t he El event h Amendment , we
do not deci de t he quest i on whet her a St at e can cl ose i t s door s
t o a t aki ngs cl ai m or t he quest i on whet her t he El event h
Amendment woul d ban a t aki ngs cl ai m i n f eder al cour t i f t he
St at e cour t s wer e to ref use t o hear such a cl ai m.
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The pl ai nt i f f s di r ect our at t ent i on t o numer ous cases i n
whi ch sui t s t o r ecover pr oper t y i l l egal l y sei zed by the
government were hel d not t o have been bar r ed by sover ei gn
i mmuni t y. But i n none of t hose cases di d t he pl ai nt i f f s sue
ei t her t he sover ei gn i t sel f or i t s al t er ego. For exampl e, i n
Uni t ed St at es v. Lee, 106 U. S. 196, 222 ( 1882) , t he Cour t
per mi t t ed an ej ect ment act i on t o pr oceed agai nst f eder al
of f i cer s who ser ved as cust odi ans of t he est at e of Gener al
Rober t E. Lee because t he sui t was not agai nst t he Uni t ed
St at es. I n Ti ndal v. Wesl ey, 167 U. S. 204 ( 1897) , t he Cour t
per mi t t ed a sui t agai nst t wo st at e of f i ci al s t o r ecover pr oper t y
wr ongl y hel d by them on behal f of t he St at e, because t he case
was a sui t agai nst i ndi vi dual s, i d. at 221, and t he Cour t
coul d not per cei ve how i t coul d be regarded as one agai nst t he
st at e, i d. at 218. And i n Hopki ns v. Cl emson Agr i cul t ur al
Col l ege of Sout h Car ol i na, 221 U. S. 636, 648- 49 ( 1911) , t he
Cour t per mi t t ed a sui t al l egi ng a t aki ngs cl ai m t o pr oceed
agai nst a uni ver si t y, but under t he l aw i n ef f ect at t he t i me,
t he f act t hat t he uni ver si t y was set up as a cor por at i on meant
t hat i t was not an ar m of t he St at e, see P. R. Por t s Aut h. v.
Fed. Mar . Comm n, 531 F. 3d 868, 884 ( D. C. Ci r . 2008) . By
cont r ast , i n Lar son v. Domest i c & For ei gn Commerce Corp. , 337
U. S. 682, 689 ( 1949) , t he Cour t di smi ssed an act i on br ought
agai nst t he head of t he War Asset s Admi ni st r at i on al l egi ng t hat
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he had r ef used t o del i ver coal t hat he had cont r act ed t o sel l t o
t he pl ai nt i f f and seeki ng an i nj uncti on pr ohi bi t i ng hi m f r om
sel l i ng or del i ver i ng t hat coal t o anyone el se, because t he
r el i ef sought was agai nst t he sover ei gn. And whi l e t he Cour t
has somet i mes deci ded t aki ngs cl ai ms wi t hout consi der i ng
El event h Amendment i mmuni t y, see, e. g. , Br own v. Legal Found. of
Wash. , 538 U. S. 216 ( 2003) ; Lucas v. S. C. Coast al Counci l , 505
U. S. 1003 ( 1992) , we cannot gl ean much f r om t hat f act gi ven t hat
a St ate can wai ve i t s El event h Amendment pr otect i on.
Fi nal l y, we not e t hat ever y ot her cour t of appeal s t o have
deci ded the quest i on has hel d that t he Taki ngs Cl ause does not
over r i de t he El eventh Amendment . See Seven Up Pete Vent ure v.
Schwei t zer , 523 F. 3d 948, 954 ( 9t h Ci r . 2008) ( [ W] e concl ude
t hat t he const i t ut i onal l y gr ounded sel f - execut i ng nat ur e of t he
Taki ngs Cl ause does not al t er t he convent i onal appl i cat i on of
t he El event h Amendment ) ; DLX, I nc. v. Kent ucky, 381 F. 3d 511,
526 ( 6t h Ci r . 2004) ( Tr eat i ng DLX s cl ai m as a sel f - execut i ng
r ever se condemnat i on cl ai m, . . . we concl ude t hat t he El event h
Amendment s gr ant of i mmuni t y pr ot ect s Kent ucky f r om t hat
cl ai m . . . ) ; Har ber t I nt l , I nc. v. J ames, 157 F. 3d 1271, 1279
( 11t h Ci r . 1998) ( hol di ng t hat a t aki ngs cl ai m was bar r ed under
t he El eventh Amendment , wher e st at e cour t s pr ovi ded a means of
r edr ess f or such cl ai ms) ; J ohn G. & Mar i e St el l a Kenedy Mem l
Found. v. Maur o, 21 F. 3d 667, 674 ( 5t h Ci r . 1994) ( hol di ng t hat
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t he di st r i ct cour t cor r ect l y det er mi ned t hat t he Foundat i on s
Fi f t h Amendment i nver se condemnat i on cl ai m br ought di r ect l y
agai nst t he St at e of Texas was bar r ed by t he El event h
Amendment ) ; Ci t adel Corp. v. P. R. Hi ghway Aut h. , 695 F. 2d 31, 33
n. 4 ( 1st Ci r . 1982) ( Even i f t he const i t ut i on i s r ead t o
r equi r e compensat i on i n an i nver se condemnat i on case, t he
El event h Amendment shoul d pr event a f ederal cour t f r om awardi ng
i t ) ; Gar r et t v. I l l i noi s, 612 F. 2d 1038, 1040 ( 7t h Ci r . 1980)
( Even though the Fi f t h Amendment al one may suppor t a cause of
act i on f or damages agai nst t he Uni t ed St at es, t he El event h
Amendment st ands as an expr ess bar t o f eder al power when a
si mi l ar act i on i s br ought agai nst one of t he st at es ( ci t at i on
omi t t ed) ) .
* * *
For t he r easons gi ven, t he j udgment of t he di st r i ct cour t
i s
AFFI RMED.