UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 96-50830
_______________________
In The Matter of: TEJAS TESTING TECHNOLOGY ONE;
TEJAS TESTING TECHNOLOGY TWO,
Debtors,
______________________________
SOUTHEAST REGION OPERATING CONTRACTORS; MUBARAK ALI ASHARIA; ALICO
BUSINESS, INC.; GENE A. DRAKE; KARTEST, INC.; HOUSTON FRAZIER;
HOULUE AIR, INCORPORATED; RICHARD GRAYSON; EMTEX CORPORATION; DAVID
HARRIS; ENVIRONMENTAL TESTING, INC.; ANTHONY JEAN; FUTURE AIR,
INC.; MARTHA KAPLAN; CHRISAIR CORPORATION; ROBERT LEE; ZAPOTEC,
INC.; JACOB MATHEW; DISNEY TESTING, INC.; WILMER J. MOORE; WESTSIDE
AUTO EMISSIONS TESTING, INC.; RICHARD MORENO, RHRM, INC.; ALVIN W.
PHILLIPS; TEXAS EMISSION SYSTEM TESTING, INC.; PEGGY ROARK; R & R
INTERESTS, INC.; M. S. SAFADI; ZODIAC ENTERPRISES AND INVESTMENT,
INC.; MARK SHERRILL; NO ZONE ENTERPRISES, INC.; YU-TSAI WEI; EARTH
AIRCARE, INC.; CLAUDIA WILSON; OLD BLUE, INC.; OPERATING
CONTRACTORS; ABS EMISSIONS, INC; AMVI ENTERPRISES, INC.; BTM, INC.;
CARRELL MANAGEMENT SERVICES, INC.; CLEAN HORSE, INC.; CRICKETT I,
LLC; CRICKETT II, LLC; CRR, INC.; DIVERSIFIED GROUP, INC.; ECOTEST
LTD., INC.; EMISSIONS CHECKS, INC.; EMISSIONS, LLC; EMISSIONS II,
LLC; GATE KEEPER, INC.; HUNGRY HORSE ENTERPRISES, LTD., CO.;
MCNEILL ENTERPRISES, INC.; NORMANDALE EMISSIONS CERTIFICATE CENTER,
INC.; RDR ENTERPRISES, INC; RHUBARB MANAGEMENT, INC.; TEJAS OAK
CLIFF, LLC; TEXAS CLEAN AIR CORPORATION; GREEN ENVIRONMENTAL
MANAGEMENT, INC.; HARBLACON TESTING, INC.; KLA SERVICES, INC.; THE
WILLIAM H. WALLACE CO.; J T J T JABB, LLC; JOHN JOHN PEREX, JR.,
INC., JR.,
Appellees,
v.
BARRY MCBEE; RALPH MARQUEZ; JOHN H. BAKER; DAN PEARSON; JAMES R.
WILSON; WILLIAM G. BURNETT; DAN MORALES, Attorney General,
Appellants.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Texas
(A-96-CV-70)
_________________________________________________________________
June 26, 1998
Before JONES, STEWART, and DENNIS, Circuit Judges.
EDITH H. JONES, Circuit Judge:*
Several operating contractors involved with Texas’s
former vehicle emissions testing program sued the state and various
state officials on a plethora of claims after the Texas legislature
discontinued the program. The defendants moved to dismiss the case
on the ground of Eleventh Amendment immunity. The district court
denied the motion to dismiss, and the defendants appealed. We
affirm in part, reverse in part, and remand.
I. Background
A. Facts
Between 1991 and 1995, the State of Texas acted to
implement a vehicle emissions testing program in certain
metropolitan areas of the state. In 1993, the state contracted
with Tejas Testing Technology One, L.C., and Tejas Testing
Technology Two, L.C., (collectively “Tejas”) to operate the testing
program. In 1995, however, the state canceled the program with the
passage of S.B. 178. Tejas then sued the Texas Natural Resources
Conservation Commission (“TNRCC”) and various state officials in
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
2
their official capacity (“State Officials”)1 (collectively “State”)
in state court for breach of contract and numerous other state and
federal causes of action. Shortly thereafter, Tejas declared
bankruptcy. The case was removed to bankruptcy court and
subsequently transferred to federal district court after the
reference was withdrawn. During this time, the operating
contractors,2 with whom Tejas had contracted to operate its
emissions testing centers, intervened as plaintiffs against the
State.
The State subsequently filed motions to dismiss Tejas’s
and the operating contractors’ complaints, asserting its Eleventh
Amendment immunity. In particular, the State Officials argued that
although the two complaints couched their requests for relief in
the form of prospective declaratory and injunctive relief under Ex
parte Young, the real nature of the relief sought was retroactive
money damages for breach of contract——a suit barred by the Eleventh
Amendment. The State Officials contended that Ex parte Young could
not apply unless Tejas and the operating contractors could identify
some form of prospective relief that would be meaningful to them.
The district court denied the motions to dismiss.
1
The state officials were the three TNRCC commissioners, the
executive director of the TNRCC, the director of the Texas
Department of Public Safety, the director of the Texas Department
of Transportation, and the attorney general.
2
The operating contractors are collectively identified in
two groups: (1) the Southeast Region Operating Contractors, and (2)
the Operating Contractors.
3
Tejas eventually settled its dispute with the State. As
a consequence, the appeal now before this court concerns only the
State Officials and the operating contractors. The precise issue
we address is the propriety of the district court’s denial of the
motion to dismiss the operating contractors’ complaint as it
pertains specifically to the State Officials.
B. Operating Contractors’ Causes of Action3
The operating contractors assert the following causes of
action against the State Officials in their First Amended
Complaint.4 Each cause of action is followed by the nature of the
relief sought.
1. breach of contract against TNRCC (money damages)
2. third party beneficiary claim against TNRCC (money
damages)
Declaratory relief that S.B. 178:
3. violates the Texas Constitution because it is a
“special law” (declaratory relief)
3
Before the State filed its motion to dismiss, the operating
contractors’ complaint contained only state law claims. After the
State filed its motion to dismiss, the operating contractors filed
their “First Amended Complaint” to add numerous federal claims.
Although the district court did not directly address the operating
contractors’ First Amended Complaint (and thus the operating
contractors’ federal claims) in denying the State’s motion to
dismiss, the district court did directly address the substance of
the operating contractors’ federal claims, because the exact same
claims were contained in Tejas’s complaint. Because the district
court addressed the applicability of the Eleventh Amendment to
every claim made by the operating contractors——although sometimes
in the context of Tejas——it is unnecessary to remand the case to
the district court for further consideration.
4
The number assigned to the summary of each cause of action
in this section is identical to the number assigned to that cause
of action in the operating contractors’ First Amended Complaint.
For simplicity, this opinion will refer to each cause of action by
number throughout.
4
4. is an unconstitutional bill of attainder under both
the Texas and U.S. Constitutions (declaratory
relief)
5. is an unconstitutional impairment of contract under
both the Texas and U.S. Constitutions (declaratory
relief)
6. is an unconstitutional retroactive law under the
Texas Constitution, which gives rise to a § 1981
claim against the State (no request for specific
relief)
7. violates the operating contractors’ civil rights
under the Texas and U.S. Constitutions by impairing
their contract rights (money damages, declaratory
relief, and injunctive relief)
8. is an unconstitutional taking under the Texas and
U.S. Constitutions (money damages and declaratory
relief)
9. violates the Commerce Clause of the U.S.
Constitution (declaratory and injunctive relief)
10. violates the Supremacy Clause of the U.S.
Constitution (declaratory and injunctive relief)
11. § 1983 action for deprivation of federal rights (money
damages and injunctive relief)
12. declaration that the operating contractors’ further
performance is excused based on the State’s conduct to
date (declaratory relief)
13. declaration that the illegality of the State’s action in
enacting S.B. 178 does not excuse performance by the
TNRCC and the State Officials under the emissions
contracts (declaratory relief)
14. declaration that S.B. 178 is void because of its
constitutional infirmities (money damages and declaratory
relief)
II. Analysis
A. Jurisdiction & Standard of Review
This court has jurisdiction to consider an interlocutory
appeal from the denial of a motion to dismiss based upon Eleventh
Amendment immunity. See Puerto Rico Aqueduct & Sewer Auth. v.
Metcalf & Eddy, Inc., 113 S. Ct. 684 (1993); Earles v. State Board
of Certified Public Accountants, 139 F.3d 1033, 1036 (5th Cir.
1988). We review a district court’s denial of a motion to dismiss
de novo, accepting all of the facts asserted in the plaintiff’s
5
complaint as true. See Jackson v. City of Beaumont Police Dep’t,
958 F.2d 616, 618 (5th Cir. 1992). The motion may be granted
“‘only if it appears that no relief could be granted under any set
of facts that could be proven consistent with the allegations.’”
Id. (quoting Baton Rouge Bldg. & Constr. Trades Council v. Jacobs
Constructors, Inc., 804 F.2d 879, 881 (5th Cir. 1986)).
B. Ex parte Young
“Young established the principle that the Eleventh
Amendment does not bar a suit in federal court against a state
official to enjoin his enforcement of a state law alleged to be
unconstitutional.” American Bank & Trust Co. v. Dent, 982 F.2d
917, 920 (5th Cir. 1993). The Ex parte Young doctrine “ensures
that state officials do not employ the Eleventh Amendment as a
means of avoiding compliance with federal law.” Puerto Rico
Aqueduct, 113 S. Ct. at 688; see also 17 CHARLES ALAN WRIGHT, ET AL.,
FEDERAL PRACTICE & PROCEDURE § 4232 (2d ed. 1988 & Supp. 1998).
However, Young “does not foreclose an Eleventh Amendment challenge
where the official action is asserted to be illegal as a matter of
state law alone.” Papasan v. Allain, 106 S. Ct. 2932, 2940 (1986)
(citing Pennhurst State Sch. & Hosp. v. Halderman, 104 S. Ct. 900,
910-11 (1984)). “In such a case, federal supremacy is not
implicated because the state official is acting contrary to state
law only.” Id. Therefore, “Young and Edelman are inapplicable in
a suit against state officials on the basis of state law.”
Pennhurst, 104 S. Ct. at 911.
6
In addition, “Young cannot be extended to permit a suit
for equitable monetary restitution from the state treasury for a
past breach of a legal duty . . . .” American Bank & Trust Co.,
982 F.2d at 920 (citing Edelman v. Jordan, 94 S. Ct. 1347, 1355-60
(1974)). Rather, Young permits only prospective injunctive or
declaratory relief. See id. (citing Pennhurst, 104 S. Ct. at 909);
see also Saltz v. Tennessee Dep’t of Employment Sec., 976 F.2d 966,
968 (5th Cir. 1992) (stating that for Ex parte Young to apply, the
“suit must be brought against individual persons in their official
capacities as agents of the state and the relief sought must be
declaratory or injunctive in nature and prospective in effect”).
(1) State-law Claims
The operating contractors’ cause of action No. 3 deals
solely with an issue of state law. Therefore, it cannot fall
within Ex parte Young. This cause of action is dismissed pursuant
to the Eleventh Amendment.
The operating contractors’ causes of action Nos. 4, 5, 6,
7, and 8 deal, in part, with whether S.B. 178 is unconstitutional
under certain provisions of the Texas Constitution. To the extent
that these causes of action turn on issues of state law alone,
they cannot fall within Ex parte Young and are dismissed pursuant
to the Eleventh Amendment.
(2) Nature of Relief Sought
The issue before this court on the operating contractors’
remaining causes of action is whether the relief sought is
declaratory or injunctive in nature and prospective in effect, or
7
whether——when all of the operating contractors’ imprecise pleading
language is removed to reveal the real nature of this case——the
relief sought is essentially retroactive monetary damages. The
Supreme Court, in addressing a similar inquiry, has stated:
Consequently, Young has been focused on cases in which a
violation of federal law by a state official is ongoing
as opposed to cases in which federal law has been
violated at one time or over a period of time in the
past, as well as on cases in which the relief against the
state official directly ends the violation of federal law
as opposed to cases in which that relief is intended
indirectly to encourage compliance with federal law
through deterrence or directly to meet third-party
interests such as compensation. As we have noted:
“Remedies designed to end a continuing violation of
federal law are necessary to vindicate the federal
interest in assuring the supremacy of that law. But
compensatory or deterrence interests are insufficient to
overcome the dictates of the Eleventh Amendment.”
Relief that in essence serves to compensate a party
injured in the past by an action of a state official in
his official capacity that was illegal under federal law
is barred even when the state official is the named
defendant. This is true if the relief is expressly
denominated as damages. It is also true if the relief is
tantamount to an award of damages for a past violation of
federal law, even though styled as something else. On
the other hand, relief that serves directly to bring an
end to a present violation of federal law is not barred
by the Eleventh Amendment even though accompanied by a
substantial ancillary effect on the state treasury.
Papasan, 106 S. Ct. at 2940 (internal citations and footnotes
omitted). The Court went on to state:
For Eleventh Amendment purposes, the line between
permitted and prohibited suits will often be indistinct:
“[T]he difference between the type of relief barred by
the Eleventh Amendment and that permitted under Ex parte
Young will not in many instances be that between day and
night.” In discerning on which side of the line a
particular case falls, we look to the substance rather
than to the form of the relief sought, and will be guided
by the policies underlying the decision in Ex parte
Young.
8
Id. at 2940-41 (internal citations omitted). The State Officials’
assertion that injunctive relief is impracticable, and therefore a
pleading ruse, because the operating contractors cannot possibly
perform the contract, is unpersuasive at this point. The argument
depends on facts outside the pleadings for purposes of the motion
to dismiss.
The operating contractors’ causes of action Nos. 1 and 2
deal with breach of contract and third-party beneficiary claims.
These two causes of action are straightforward claims for
retroactive monetary damages for the breach of a past legal duty.
As such, if directed at the State Officials, they do not fall
within Ex parte Young and should be dismissed. However, because
causes of action Nos. 1 and 2 are expressly framed against only the
TNRCC, we do not reach this issue.
To the extent that the operating contractors’ causes of
action Nos. 8 and 11 seek retroactive monetary damages, they are
dismissed pursuant to the Eleventh Amendment.
Finally, the operating contractors’ causes of action Nos.
4 to 14 all seek, at least on their face, prospective declaratory
or injunctive relief for a continuing violation of federal law.5
Whether there is any merit to these claims is far from clear, if
for no other reason than it appears doubtful whether there exists
a contractual relationship between the operating contractors and
the State of Texas. More importantly, whether these claims are
5
To the extent that this opinion has already addressed
causes of action Nos. 4, 5, 6, 7, 8, and 11, the following part of
this opinion does not apply to them.
9
truly for prospective declaratory or injunctive relief is
uncertain. The State Officials argue that there is no meaningful
declaratory or injunctive relief available to the operating
contractors and that this suit is essentially a suit for
retroactive money damages disguised in a carefully worded complaint
giving the appearance of an Ex parte Young action. If this turns
out to be true upon remand and further proceedings in the district
court, these causes of action should be dismissed pursuant to the
Eleventh Amendment. A suit for retroactive money damages against
a state official in his official capacity is barred by the Eleventh
Amendment and does not fall within the Ex parte Young exception.
However, for the present purpose of determining whether the
district court properly denied the State Officials’ motion to
dismiss, the operating contractors have stated in causes of action
Nos. 4 to 14 claims that -- on their face -- fall within Ex parte
Young. To the extent that these causes of action are claims
against individual state officials for prospective declaratory and
injunctive relief in the face of a Texas law (S.B. 178) alleged to
be a continuing violation of federal law, they are not barred by
the Eleventh Amendment. See Idaho v. Coeur d’Alene Tribe of Idaho,
117 S. Ct. 2028, 2040 (1997) (“An allegation of an on-going
violation of federal law where the requested relief is prospective
is ordinarily sufficient to invoke the Young fiction.”). In sum,
at this stage, it does not appear that no relief could be granted
to the operating contractors under any set of facts that could be
10
proven consistent with the allegations contained in their First
Amended Complaint.6
III. Conclusion
For the foregoing reasons, the district court is REVERSED
in part, AFFIRMED in part, and this case is REMANDED for further
proceedings consistent with this opinion.
6
Declaratory or injunctive relief on remand, of course, is
far from certain. “[A] plaintiff who has brought his case within
the Young doctrine must still overcome the other statutory and
court-made barriers to such injunctions, and he must meet the usual
equitable requirements for an injunction. ‘[N]o injunction ought
to issue against officers of a State clothed with authority to
enforce the law in question, unless in a case reasonably free from
doubt and when necessary to prevent great and irreparable injury.’”
17 WRIGHT ET AL., supra, § 4232, at 569 (internal footnote omitted)
(citing Massachusetts State Grange v. Benton, 47 S. Ct. 189, 190
(1926)).
11