U.S. ex rel. Oberg v. Kentucky Higher Education, No. 12-2513 (4th Cir. 2014)

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Justia Opinion Summary

Relator filed suit against certain student loan corporations, alleging that they defrauded the Department of Education and thus violated the False Claims Act (FCA), 31 U.S.C. 3729 et seq. After applying the arm-of-the-state analysis on remand, the district court again concluded that all of the student loan corporations constituted state agencies not subject to suit under the Act and granted their motions to dismiss. Applying the arm-of-the-state analysis to the corporations, the court vacated the judgment of the district court as to PHEAA and remanded to permit limited discovery on the question of whether PHEAA was truly subject to sufficient state control to render it a part of the state; vacated the judgment with respect to VSAC and remanded to permit limited discovery; and affirmed the judgment with respect to ASLA because it is an arm of Arkansas and therefore not subject to suit under the FCA.

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PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 12-2513 UNITED STATES ex rel. JON H. OBERG, Plaintiff - Appellant, v. PENNSYLVANIA HIGHER STUDENT ASSISTANCE AUTHORITY, EDUCATION ASSISTANCE AGENCY; VERMONT CORPORATION; ARKANSAS STUDENT LOAN Defendants - Appellees, and NELNET, INC.; SLM CORPORATION; PANHANDLE PLAINS HIGHER EDUCATION AUTHORITY; BRAZOS GROUP; EDUCATION LOANS INC/SD; SOUTHWEST STUDENT SERVICES CORPORATION; BRAZOS HIGHER EDUCATION SERVICE CORPORATION; BRAZOS HIGHER EDUCATION AUTHORITY, INC.; NELNET EDUCATION LOAN FUNDING, INC.; PANHANDLE-PLAINS MANAGEMENT AND SERVICING CORPORATION; STUDENT LOAN FINANCE CORPORATION, Defendants. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:07-cv-00960-CMH-JFA) Argued: September 19, 2013 Before TRAXLER, Judges. Chief Judge, Decided: and MOTZ and March 13, 2014 KEENAN, Circuit Affirmed in part, vacated in part, and remanded by published opinion. Judge Motz wrote the opinion, in which Judge Keenan joined. Chief Judge Traxler wrote a separate opinion concurring in the judgment in part and dissenting in part. ARGUED: Bert Walter Rein, WILEY REIN, LLP, Washington, D.C., for Appellant. Daniel B. Huyett, STEVENS & LEE, Reading, Pennsylvania; John Stone West, TROUTMAN SANDERS, LLP, Richmond, Virginia; N. Thomas Connally, III, HOGAN LOVELLS US LLP, McLean, Virginia, for Appellees. ON BRIEF: Michael L. Sturm, Christopher M. Mills, Brendan J. Morrissey, WILEY REIN, LLP, Washington, D.C., for Appellant. Thomas L. Appler, WILSON ELSER MOSKOWITZ EDELMAN & DICKER LLP, McLean, Virginia, for Appellee Kentucky Higher Education Student Loan Corporation. Megan C. Rahman, TROUTMAN SANDERS LLP, Richmond, Virginia, for Appellee Vermont Student Assistance Corporation. Thomas M. Trucksess, HOGAN LOVELLS US LLP, McLean, Virginia; Dustin McDaniel, Arkansas Attorney General, Dennis R. Hansen, Deputy Attorney General, Mark N. Ohrenberger, Assistant Attorney General, OFFICE OF THE ARKANSAS ATTORNEY GENERAL, Little Rock, Arkansas, for Appellee Arkansas Student Loan Authority. Neil C. Schur, STEVENS & LEE, P.C., Philadelphia, Pennsylvania; Jill M. DeGraffenreid, McLean, Virginia, Joseph P. Esposito, HUNTON & WILLIAMS LLP, Washington, D.C., for Appellee Pennsylvania Higher Education Assistance Agency. 2 DIANA GRIBBON MOTZ, Circuit Judge: This court. appeal returns to us after remand to the district Dr. Jon Oberg, as relator for the United States, brought this action against certain student loan corporations, alleging that they defrauded the Department of Education and so violated the False Claims Act ( FCA or the Act ), 31 U.S.C. §§ 3729 et seq. (2006). The district complaint in its entirety. court initially dismissed the When Dr. Oberg appealed, we held that the court had not employed the proper legal framework -the arm-of-the-state analysis -- in reaching its conclusion and thus vacated its judgment and remanded the case. See U.S. ex rel. Oberg v. Ky. Higher Educ. Student Loan Corp., 681 F.3d 575, 579-81 (4th Cir. 2012) ( Oberg I ). After applying the arm-of- the-state analysis on remand, the district court again concluded that all of the student loan corporations constituted state agencies not subject to suit under the Act and so again granted their motions affirm in to part, dismiss. vacate For in the part, reasons and that remand follow, for we further proceedings consistent with this opinion. I. On action Agency, behalf against the of the the Vermont United States, Pennsylvania Student Dr. Higher Assistance 3 Oberg brought Education this Assistance Corporation, and the Arkansas Student Loan Authority (collectively appellees ). Appellees are corporate entities established by their respective states to improve access to higher education by originating, financing, and guaranteeing student loans. 1 Dr. Oberg alleges that appellees defrauded the Department of Education by submitting false claims for Special Allowance Payments ( SAP ), subsidy. a generous According to federal Dr. Oberg, student loan appellees interest engaged in noneconomic sham transactions to inflate their loan portfolios eligible for SAP, and the Department of Education overpaid hundreds of millions of dollars to appellees as a result of the scheme. Dr. Oberg alleges that appellees violated the FCA when they knowingly submitted these false SAP claims. The FCA provides a cause of action against any person who engages in certain present[ing], fraudulent employee, or claim or § 3729(a)(1)(A). fraudulent caus[ing] for agent conduct, to payment of be or the including presented, approval United to States. knowingly a false an 31 or officer, U.S.C. The Act does not define the term person. In Vermont Agency of Natural Resources v. United States, ex rel. 1 Dr. Oberg also sued other defendants not parties to this appeal. Among those defendants was another student loan corporation, the Kentucky Higher Education Student Loan Corporation, which reached a settlement with Dr. Oberg shortly before the most recent appeal. 4 Stevens, 529 U.S. 765, 787-88 (2000), the Supreme Court held that a state or state agency does not constitute a person subject to liability under the Act. But the Court also noted that corporations, by contrast, are presumptively covered by the term person. Id. at 782 (emphasis in original). And three years later, the Court applied the latter presumption and held that municipal corporations subject to suit under the FCA. like counties are persons See Cook Cnty. v. U.S. ex rel. Chandler, 538 U.S. 119, 122 (2003). Accordingly, a court must walk a careful line between two competing presumptions to determine if a state-created corporation is truly subject to sufficient state control to render [it] a part of the state, and not a person, for FCA purposes. held that Oberg I, 681 F.3d at 579. 2 the appropriate legal In the prior appeal, we framework for this delicate inquiry is the arm-of-the-state analysis used in the Eleventh Amendment context. Id. at 579-80. Because the district court had not undertaken this analysis, we vacated its judgment and 2 Dr. Oberg insists that only one presumption applies: that all corporate entities -- regardless of their affiliation with a state -- must overcome a presumption of personhood. Appellant s Br. 15. The dissent seems to agree. See Dissent. Op. at 34. But this assertion ignores the Supreme Court s clear instruction that in the context of corporations created by and sponsored by a state, competing presumptions are at play. See Stevens, 529 U.S. at 782 (observing that the presumption with regard to corporations is just the opposite of the one governing [state entities] ). 5 remanded the case to the district court for application of the proper legal framework. On remand, after Id. at 581. applying the arm-of-the-state analysis, the district court concluded that each appellee is part of its respective state and thus not a person under the Act, and so again granted appellees motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). Dr. Oberg then timely noted this appeal. On review of a Rule 12(b)(6) dismissal, we consider a case de novo. See E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011). whether the complaint states plausible on its face. 544, 547 (2007). most favorable a claim We evaluate only to relief that is Bell Atl. Corp. v. Twombly, 550 U.S. In doing so, we construe facts in the light to the plaintiff, Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009), and draw Indus., 637 all reasonable F.3d at 440. inferences Yet we in need [his] not favor accept as Kolon true unwarranted inferences, unreasonable conclusions, or arguments. Kloth v. Microsoft Corp., 444 F.3d 312, 319 (4th Cir. 2006). Nor do we credit allegations that offer only naked assertions devoid of further factual enhancement. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations marks, alteration, and citation omitted). 6 Moreover, in reviewing a Rule 12(b)(6) dismissal, we are not confined to the four corners of the complaint. It is well established notice that we may properly take judicial matters of public record, including statutes. Philips v. Pitt Cnty. Mem l Hosp., 572 F.3d 176, 180 (4th Cir. 2009). also consider documents incorporated into of the We may complaint by reference, Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007), as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic, Philips, 572 F.3d at 180. Thus, before us, the parties properly cite to and rely on state statutes and exhibits integral to the complaint. Finally, we note that although arm-of-the-state status may well constitute an affirmative defense in the related Eleventh Amendment context, this is not so in an FCA case. To succeed in an FCA case, a relator must demonstrate that a defendant is a person within the meaning of the Act. recognizes, this is a statutory question. As the dissent Dissent. Op. at 36. That is, personhood is an element of the statutory FCA claim, not an immunity providing a defense from suit as in the Eleventh Amendment context. See, e.g., U.S. ex rel. Adrian v. Regents of Univ. of Cal., 363 F.3d 398, 401-02 (5th Cir. 2004) (dismissing 7 FCA action on 12(b)(6) motion because the FCA does not provide a cause of action against state agencies ). 3 II. In applying the arm-of-the-state analysis, we consider four nonexclusive factors to determine whether an entity is truly subject to sufficient state control to render [it] a part of the state. Oberg I, 681 F.3d at 579. First, when (as here), an entity is a defendant, we ask whether any judgment against the entity as defendant will be paid by the State. Oberg I, 681 F.3d at 580 (quoting S.C. Dep t Disabilities & Special Needs v. Hoover Universal, Inc., 535 F.3d 300, 303 (4th Cir. 2008)). 4 The Supreme Court has 3 The dissent s suggestion to the contrary thus misses the mark. Tellingly, it offers only Eleventh Amendment cases in support of its contention that arm-of-the-state status is an affirmative defense. See Dissent. Op. at 35-36. But the Supreme Court has made clear that the statutory FCA question is distinct from the Eleventh Amendment inquiry. See Stevens, 529 U.S. at 779-80 (explaining that the Court initially considers whether the [FCA] itself permits the cause of action it creates to be asserted against States before reaching the Eleventh Amendment sovereign immunity question). 4 When an entity is a plaintiff, this factor requires us to determine whether any recovery by the entity as plaintiff will inure to the benefit of the State. Hoover Universal, 535 F.3d at 303. We previously regarded the first factor as the most important consideration, Ram Ditta v. Md. Nat l Capital Park & Planning Comm n, 822 F.2d 456, 457 (4th Cir. 1987), and the dissent seems to regard it as dispositive, see Dissent. Op. at 41. But as we noted in Oberg I, 681 F.3d at 580 n.3, more (Continued) 8 instructed that in assessing this factor, an entity s potential legal liability is key. Regents, 519 U.S. at 431; see also Parker v. Franklin Cnty. Cmty. Sch. Corp., 667 F.3d 910, 927-28 (7th Cir. 2012) (focusing on legal liability for payment of a judgment in the wake of Regents); Cooper v. Se. Penn. Transp. Auth., 548 F.3d 296, 303 (3d Cir. 2008)(same); U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 718 (10th Cir. 2006) (same). law provides that Thus, we consider whether state obligations binding on [the] State. of [the entity] shall not be Lake Country Estates, Inc. v. Tahoe Reg l Planning Agency, 440 U.S. 391, 402 (1979) (emphasis in original). In doing so, we look to whether State law indicates that a judgment against [the entity] can be enforced against the State. Cash v. Granville Cnty. Bd. of Educ., 242 F.3d 219, 224 (4th Cir. 2001). An entity may also constitute an arm of the state where the state is functionally liable, even if not legally liable. Stoner v. Santa Clara Cnty. Office of Educ., 502 F.3d 1116, 1122 (9th Cir. 2007) (emphasis added); see also Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 50 (1994) ( Where an agency is recent Supreme Court precedent suggests that although this factor remains of considerable importance, Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 430 (1997), it does not deserve dispositive preeminence, see Fed. Maritime Comm n v. S.C. State Ports Auth., 535 U.S. 743, 765 (2002). 9 so structured that, as a practical matter, if the agency is to survive, a judgment must expend itself against state treasuries, common sense and the rationale of the eleventh amendment require that sovereign immunity attach to the agency. ) (internal quotation marks and alteration omitted). Second, we assess the degree of autonomy exercised by the entity, including entity s such directors or circumstances officers, who as who funds appoints the entity, and the whether the State retains a veto over the entity s actions. Oberg I, 681 F.3d at 580 (quoting Hoover Universal, 535 F.3d at 303). Also relevant to the autonomy inquiry is the determination whether an entity has the ability to contract, sue and be sued, and purchase and sell property, see Cash, 242 F.3d at 225; Ram Ditta, 822 F.2d at 458, and whether it is represented in legal matters by the state attorney general, see, e.g., Md. Stadium Auth. v. Ellerbe Becket, Inc., 407 F.3d 255, 264 (4th Cir. 2005). Third, we consider whether the entity is involved with state concerns as distinct from non-state concerns, including local concerns. Oberg I, Universal, 535 F.3d at 303). 681 F.3d at 580 (quoting Hoover Non-state concerns, however, do not mean only local concerns, but rather also encompass other non-state interests like out-of-state operations. Universal, 535 F.3d at 307 (characterizing 10 this See Hoover factor as whether the entity is involved with statewide, as opposed to local or other non-state concerns ) (emphasis added). Fourth, we look to how the entity is treated under state law, such as whether the entity s relationship with the State is sufficiently close to make the entity an arm of the State. Oberg I, 681 F.3d at 580 (quoting Hoover Universal, 535 F.3d at 303). Whether an entity is an arm of the state is ultimately a question of federal law, [b]ut that federal question can be answered only after considering the provisions of state law that define the agency s character. Regents, 519 U.S. at 429 n.5. In court addressing relevant this state factor, statutes, a may regulations, consider and both the constitutional provisions which characterize the entity, and the holdings of state courts on the question. Md. Stadium Auth., 407 F.3d at 265 (internal quotation marks omitted). With these principles in mind, we now apply arm-of-thestate analysis to each of the appellees. III. We initially consider Assistance Agency ( PHEAA ). the Pennsylvania Higher Education In 1963, the Pennsylvania General Assembly created PHEAA, which, according to PHEAA itself, now constitutes one of the nation s largest providers of student financial aid services. Although PHEAA continues to administer 11 state-funded student aid programs in Pennsylvania, it acknowledges that it also operates nationally under the names American Education Services and FedLoan Servicing. The first factor in the arm-of-the-state analysis, whether Pennsylvania would pay a judgment against PHEAA in this case, weighs decidedly against holding that PHEAA is an arm of the state. For instead of the state treasury being directly responsible for judgments against [PHEAA], [state law] expressly provides that obligations of [PHEAA] shall not be binding on [the] State. Lake Country Estates, 440 U.S. at 402 (emphasis in original). Pennsylvania explicitly disavows liability for all of PHEAA s debts. See 24 Pa. Cons. Stat. § 5104(3)(2012) ( no obligation of the agency shall be a debt of the State ). In addition, state law emphasizes that PHEAA s debts are not payable out of any moneys except those of the corporation. Id. Aside students in from the state form of appropriations education that grants, go directly moreover, to PHEAA s substantial moneys derive exclusively from its own operations. The Pennsylvania treasury is thus neither functionally liable for any judgment against PHEAA. legally nor See Stoner, 502 F.3d at 1122. Nevertheless, PHEAA contends that the important first factor weighs in favor of concluding that it is an arm of the state because state statutes require that its funds be deposited 12 into the state treasury and that no money be paid from the treasury without approval from the state treasurer. See 24 Pa. Cons. Stat. § 5104(3); 72 Pa. Cons. Stat. § 307 (2013). argument, however, ignores a commonplace This of statutory construction that the specific governs the general. Morales v. Trans World Airlines, 504 U.S. 374, 384 (1992). provisions specifically clearly indicate state treasurer that - outlining PHEAA s controls PHEAA s board of PHEAA s The statutory powers directors funds. and - Those duties not the statutes provide that PHEAA s funds shall be available to the agency and may be utilized at the discretion of the board of directors for carrying out any of the corporate purposes of the agency. 24 Pa. Cons. Stat. § 5104(3). Further, the state treasurer may use PHEAA s funds only for purposes consistent with guidelines approved by the board of directors. Id. Moreover, PHEAA s funds are held in a segregated account apart from general state funds. circuits have recognized that Id. § 5105.10. such an Our sister arrangement counsels against establishing arm-of-the-state status under this factor. The First Circuit, for instance, held that the University of Rhode Island is not an arm of its state in part because its funds are not merged with[] the general fund, but are kept in segregated accounts [in the state treasury] discretionary disbursement by the [University s] Board. 13 pending Univ. of R.I. v. A.W. Chesterton Co., 2 F.3d 1200, 1210 (1st Cir. 1993). Similarly, the Third Circuit, in assessing whether the Public School Employees Retirement Board of Pennsylvania was an arm of the state, remanded the case for further consideration in part because - like PHEEA s account -- the entity s fund was set apart in the state treasury from general state funds and [] administered by the State Treasurer at the discretion of the Board. Blake v. Kline, 612 F.2d 718, 723 (3d. Cir. 1979) (footnote and citations omitted). In sum, because state law instructs that PHEAA would pay any judgment in this case with its own moneys from its segregated fund, see 24 Pa. Cons. Stat. § 5104(3)(2012), the first factor weighs heavily against holding that PHEAA is an arm of the state. The second factor, the degree of autonomy exercised by the entity, presents a closer question. PHEAA s board of directors is composed of gubernatorial appointees and state legislators or officials. See 24 Pa. Cons. Stat. § 5103 (repealed July 2010, but effective during the period when PHEAA allegedly violated the FCA). control. Such an arrangement frequently indicates See Md. Stadium Auth., 407 F.3d at 264. state Further, state officials exercise some degree of veto power over PHEAA s operations. For example, the Auditor General may review PHEAA s activities, 24 Pa. Cons. Stat. § 5108, and PHEAA must seek the approval of the Governor in order to issue notes and bonds, id. 14 § 5104(3). These factors may mean, as PHEAA contends, that it is simply a tool of the state. But PHEAA s other source indicia of relevant funding, to the control autonomy over its analysis revenues, -and corporate powers - strongly suggest that PHEAA is not an arm of the state. According Most critically, PHEAA is financially independent. to its annual reports, which were attached to the amended complaint, PHEAA receives no operational funding from Pennsylvania. Pennsylvania See also Appellees Br. 53 (conceding the point). law, moreover, expressly instructs that PHEAA s funds shall be available to the agency, and that PHEAA s board may use those funds in any manner that furthers the agency s corporate purposes. the state 24 Pa. Cons. Stat. § 5104(3). treasurer s use of PHEAA s funds guidelines approved by the board of PHEAA. must Id. Meanwhile, adhere to Finally, PHEAA has the power to enter into contracts, sue and be sued, and purchase and sell property in its own name, all of which suggest operational autonomy. Ditta, 822 F.2d at 458. See Cash, 242 F.3d at 225; Ram Although the facts relevant to this second factor cut both ways, when we consider all reasonable inferences in favor of the plaintiff as we must at this stage, Kolon Indus., 637 F.3d at 440, we conclude that this factor also counsels against holding that PHEAA is an arm of the state. 15 The third factor is whether PHEAA is involved with statewide, as opposed to local or other non-state concerns. Hoover Universal, 535 F.3d at 307. Dr. Oberg poses two arguments relevant to this factor. Initially, he contends that due to PHEAA s commercial focus, its operations do not involve an area of legitimate state concern. See argument fails. and guarantee education is Appellant s 43; Reply area for of higher education, quintessential traditional state government function. F.3d at 265. Br. 25-26. This Pennsylvania created PHEAA to finance, make, loans an Br. state and [h]igher concern and a Md. Stadium Auth., 407 PHEAA does not provide higher education directly, but it nonetheless facilitates the attainment of education by supplying student financial aid services. This work is clearly of legitimate state concern. Dr. Oberg s remaining argument as to the third factor is that PHEAA s operations from 2002 to 2006 -- during the time in which PHEAA allegedly conducted fraudulent transactions in violation of the FCA -- were so focused out of state that PHEAA was not involved primarily with state concerns. 5 5 See Ram Ditta, PHEAA counters that out-of-state operations are irrelevant because this factor is concerned only with whether an entity s focus is statewide as opposed to local. The argument is misguided. Rather, this factor looks to whether the entity is (Continued) 16 822 F.2d at 459; cf. Hoover Universal, 535 F.3d at 307. end, Dr. Oberg alleges that PHEAA conducts To this substantial operations outside of Pennsylvania, and that as early as 2005, one-third of PHEAA s [C]ommonwealth, operations. after earnings which c[a]me it from the expanded further outside its PHEAA s financial reports, cited throughout Dr. Oberg s complaint, tend to corroborate these claims, so there is little doubt operations that extended during well the beyond period the in question borders of PHEAA s Pennsylvania. Even so, if only one-third of PHEAA s earnings came from outside Pennsylvania in 2005, it does not seem plausible that by 2006 -the last year encompassed by Dr. Oberg s allegations - PHEAA s operations focused primarily out of state. See Ram Ditta, 822 F.2d at 459; see also Iqbal, 556 U.S. at 678 (explaining that [w]here a complaint pleads facts that are merely consistent with a defendant s liability, it stops short of the line between possibility and plausibility of entitlement (internal quotation marks and citation omitted). to relief ) Therefore, we believe this factor weighs in favor of arm-of-the-state status for PHEAA. involved with statewide, as opposed to local or other non-state concerns. Hoover Universal, 535 F.3d at 307 (emphasis added). 17 The final factor, how PHEAA is treated under state law, also supports Pennsylvania. the agency PHEAA s contention that it is an arm of A state statute provides that the creation of [was] in all respects for the benefit of the people . . . and the agency [performs] an essential governmental function. 24 Pa. Cons. Stat. § 5105.6. PHEAA s enabling legislation was made effective by amendment to the Constitution of Pennsylvania education, concluded id. that authorizing § 5112, PHEAA and grants is or loans for state courts a Pennsylvania state agency for higher have jurisdictional purposes, see, e.g., Richmond v. Penn. Higher Educ. Assistance Agency, 297 A.2d 544, 546 (1972); Penn. Higher Educ. Assistance Agency v. Barksdale, 449 A.2d 688, 689-90 (1982). In sum, although the third and fourth factors suggest that PHEAA is an arm of the state, the first (strongly) and second (albeit less strongly) point in the opposite direction. At this early stage, construing the facts in the light most favorable to the plaintiff, Nemet Chevrolet, 591 F.3d at 255, we must conclude that Dr. Oberg has alleged sufficient facts that PHEAA is not an purposes. arm We of the therefore state, but vacate the rather a judgment person of the for FCA district court as to PHEAA and remand to permit limited discovery on the question whether PHEAA is truly subject to sufficient state 18 control to render [it] a part of the state. Oberg I, 681 F.3d at 579. IV. We next consider whether Dr. Oberg s complaint states a plausible claim that the Vermont Student Assistance Corporation ( VSAC ) is a person subject to suit under the FCA. Vermont legislature residents with created VSAC opportunities in to 1965 attend to provide college education grants and financing student loans. tit. 16, § 2821(a) (2013). According to by The Vermont awarding Vt. Stat. Ann. VSAC s financial statements - referenced repeatedly in Dr. Oberg s complaint -the agency currently administers a state grant program and a higher education guarantees investment student plan; loans; and originates, provides services, higher and education information and counseling services. The upshot of the first arm-of-the-state factor would pay a judgment in this case - is unclear. provides no definite guidance. that Vermont would not pay which disavows who State law On one hand, Dr. Oberg alleges a judgment disclaims legal liability for VSAC s debts. Pennsylvania, -- liability because the state Yet, in contrast to for any and all of PHEAA s obligations, see 24 Pa. Cons. Stat. § 5104(3), Vermont does so only with respect to VSAC s debt obligations issued to 19 finance loans for higher education, see Vt. Stat. Ann. tit. 16, § 2823(f); id at § 2868(i). Dr. Oberg has identified no state law indicating that a judgment obligation could not be enforced against the state, and we have found none. See Lake Country Estates, 440 U.S. at 402 (finding relevant whether state law provides that obligations of [the entity] shall not be binding on [the] State ). On the other hand, VSAC s contention that Vermont would pay a judgment rests on the state s duty to support and maintain VSAC. Vt. Stat. Ann. tit. 16, § 2823(a). stated in such general terms is not But an obligation conclusive. Moreover, although state appropriations compose nearly twenty percent of VSAC s revenues, such funding goes entirely to students in the form of need-based grants. Thus, whether Vermont would be legally or functionally liable for a judgment here is unclear. At this stage, however, we must construe all facts in the light most favorable to the plaintiff, Nemet Chevrolet, 591 F.3d at 255, so we assume that this critical (albeit not dispositive) first factor weighs against arm-of-the-state status for VSAC. The second factor, VSAC s degree state, also presents a close question. of autonomy from the Vermont law provides that eight members of VSAC s eleven-member board of directors are either state officials or gubernatorial appointees, and that the board elects the remaining three members. 20 Vt. Stat. Ann. tit. 16, § 2831. Moreover, Vermont retains important oversight authority over VSAC. to alter, amend, The state reserves the right at any time repeal or otherwise change the structure, organization, programs, or activities of VSAC, id. § 2821(b), and state law provides that VSAC may issue no debt obligation without the approval in writing of the governor, id. § 2823(f). Other autonomy indicators, however, counsel against holding that VSAC is an arm of the state. VSAC not only exercises corporate powers including the capacity to contract and sue and be sued, see Cash, 242 F.3d at 225, it is also, like PHEAA, financially independent. throughout the VSAC s complaint, financial indicate statements, VSAC that cited state uses appropriations only for need-based educational grants; no state funds finance its operations. In addition, VSAC s board is broadly empowered to adopt policies and regulations governing its lending activities, Vt. Stat. Ann. tit. 16, § 2834, and to do any and all acts and things as may be necessary to secure its debt obligations, id. § 2868(d). Thus, although we recognize that certain facts relevant to the autonomy analysis suggest that VSAC is an arm of the state, others weigh decidedly against that conclusion. Once again draw[ing] all reasonable inferences in favor of the plaintiff, Kolon Indus., 637 F.3d at 21 440, we believe this factor also counsels against holding as a matter of law that VSAC is an arm of the state. As to the third factor, whether VSAC is involved with statewide concerns, Dr. Oberg alleges that this factor weighs against holding that VSAC is an arm of the state because Vermont law allows VSAC to conduct business in other States and the agency has outside Vermont. allegation that contracted with borrowers and companies But these assertions do not equate to an VSAC s operations Vermont at any point in time. centered primarily outside See Ram Ditta, 822 F.2d at 459. Indeed, Dr. Oberg s allegations here fall short even of those he offers as to PHEAA s extra-state operations, which we have held do not rise to the level of establishing a plausible claim of arm-of-the-state status under this factor. at 678. Rather, VSAC s financial See Iqbal, 556 U.S. statements indicate that during the period in question the agency was focused on the statewide concern of facilitating postsecondary educational opportunities for residents of Vermont. With respect to the fourth factor, how state law treats the entity, Dr. Oberg alleges that Vermont does not treat VSAC as it treats true agencies of the state. But in fact Vermont law expressly provides that VSAC shall be an instrumentality of the state, Vt. Stat. Ann. tit. 16, § 2823(a), exempts VSAC from all taxation, id. § 2825, and designate[s] 22 [VSAC] as the state agency to receive federal funds assigned to the state of Vermont for student financial aid programs, id. § 2823(c). In sum, although the first and second factors present close questions, we must conclude in compliance with Rule 12(b)(6) that both weigh Accordingly, against while holding the third VSAC and an arm fourth of the factors state. suggest otherwise, we must also hold that Dr. Oberg s allegations as to VSAC are sufficient to survive a motion to dismiss. This is so particularly given the first factor s enduring importance. supra at 8 n.4. We recognize that some of Dr. See Oberg s allegations test the outer bounds of the plausibility standard, but at this juncture, we must construe all facts in the light most favorable to the plaintiff. We therefore vacate the judgment of the district court with respect to VSAC and remand to permit limited discovery on this question. V. Finally, we consider whether the Arkansas Student Loan Authority ( ASLA ) is an arm of the state of Arkansas. The state legislature created ASLA in 1977 to help Arkansas provide higher educational opportunities for its residents. Ann. § 6-81-102 (2013). Ark. Code ASLA currently originates and disburses student loans at postsecondary schools throughout the state. 23 It also sponsors outreach services to increase awareness about financial aid in higher education. In contrast to PHEAA and VSAC, all four factors weigh in favor of holding that ASLA is an arm of the state. First, although § 6-81-113 of the Arkansas Code disavows liability for debt obligations nothing about obligation. issued to liability Critically, finance for student other Arkansas debts loans, like statutes it a says judgment elsewhere indicate that state revenues would be used to satisfy a judgment against ASLA. State law instructs that [a]ll moneys received by [ASLA] from its lending operations are specifically declared to be cash funds, and further, that cash funds are revenues of the state. Id. at §§ 6-81-118(a)(1), 19-6-103. Accordingly, because ASLA s income derives overwhelmingly from its lending activities, and because such income statutorily belongs to Arkansas, it follows that the state would foot the bulk of any judgment against ASLA. the contrary could procure judgment. establish some only other a motion to dismiss. dubious income See Reply Br. at 14. Dr. Oberg s allegations to possibility with which to that ASLA satisfy a More is required to survive a See Iqbal, 556 U.S. at 678. The dissent misses the mark in contending that Arkansas s statutory scheme Pennsylvania, is Dissent. similar Op. at 24 in 50 many n.4, ways and that to that state in funds would not be used to satisfy a judgment against ASLA because, in reality, Arkansas claims only ASLA s surplus revenues, Dissent. Op. at 51. only ASLA s Arkansas does not, in reality, claim surplus revenues as revenues of the state. Arkansas law expressly provides that all moneys received by ASLA in connection with its lending activities are revenues of the state. Ark. Code Ann. §§ 6-81-118(a)(1), 19-6-103. And Arkansas law carefully cabins ASLA s use of those state revenues to certain lending costs, id. § 6-81-118(b)-(c), an arrangement far removed from the Pennsylvania scheme granting PHEAA discretion[ary] authority to use its funds for any corporate purpose, see 24 Pa. Cons. Stat. § 5104(3). The dissent also misses the mark in suggesting that our analysis here is directly contrary to that in Hess v. Port Authority Trans-Hudson Corp., 513 U.S. 30 (1994), for this contention ignores crucial differences between the two cases. While ASLA is a corporation created by a single state to further educational opportunities in that state, the Port Authority in Hess is a bistate Compact political accountability. Clause Id. at 42. entity with diffuse Because Congress must authorize the creation of such bistate entities, see U.S. Const. art. 1, § 10, cl. 3, they owe their existence to [both] state and federal sovereigns and so lack the tight tie to the people of one State that an instrument of single State has, Hess, 513 25 U.S. at 42. For this reason, the Supreme Court recognizes a general approach for Compact Clause entities, like the Port Authority, under which a court will presume that they are not arms of the state. established no Id. at 43. similar general (Of course, the Court has approach for state-created corporations like ASLA.) Notwithstanding this presumption, and even though no state appropriated funds to the Port Authority or claimed the Authority s income as its revenue, the Authority argued that it was an arm of a state because it dedicated some of its surplus to public projects which the States themselves might otherwise finance. Id. at 50. The Supreme Court had little difficulty rejecting that argument, noting that because the Authority was a profitable Compact Clause entity that retained and controlled its income, against it. the associated Id. at 51. states would not pay a judgment ASLA, by contrast, is an instrument of a single [s]tate, id. at 43, and state law expressly provides that all of its lending income belongs to that state. Thus, state funds necessarily would be used to pay a judgment against ASLA. In sum, Hess does not in any way undermine our holding 26 that this first factor indicates that ASLA is an arm of the state. 6 As to the second arm-of-the-state factor, ASLA operates with little autonomy from Arkansas despite its corporate powers. State legislative and Vermont, records Arkansas substantial funding. 7 establish provides its that, unlike student loan Pennsylvania corporation Moreover, the Arkansas Attorney General 6 The dissent disputes this conclusion for two additional reasons. Relying on the principle that the specific governs the general, Morales, 504 U.S. at 384, the dissent notes that only general statutory provisions - not those exclusively applicable to ASLA - define cash funds as revenues of the state. See Dissent. Op. at 48-49. But the principle of statutory construction on which the dissent relies applies only where general and specific statutory provisions conflict, or where a general provision would render a more specific one superfluous. See RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065, 2071 (2012). The principle finds no footing where, as here, specific and general statutory provisions do not conflict, but rather go hand in hand. That is, the specific provision defining ASLA s revenues as cash funds is entirely consistent with the general provision declaring that cash funds are revenues of the state. The dissent also posits that the fact that ASLA s funds are held in a segregated fund outside the state treasury counsels against arm-of-state status. Dissent. Op. at 49. As a general rule, we agree that such an arrangement would weigh against holding that an entity is an arm of its state. But Arkansas is an exception to this general rule, because state law expressly declares agency income deposited outside the state treasury to be revenue of the state. Ark. Code Ann. § 19-6-103. In contrast to the dissent s suggestion, see Dissent. Op. at 50 n.4, ASLA s statutory scheme thus operates nothing like that governing PHEAA. 7 The dissent unconvincingly suggests that this funding is irrelevant to the autonomy inquiry because it derives from ASLA s own cash funds. Dissent. Op. at 51, 55. But the source (Continued) 27 represents ASLA in litigation, including the case at hand, and state law limits ASLA s powers in several significant ways. For example, Arkansas subjects ASLA s use of cash funds to approval by the General Assembly, Ark. Code Ann. § 19-4-802, and prevents its sale of bonds until the bond issue has the written approval of the Governor after he or she has received the approval of the State Board of Finance, id. § 6-81-108. Critically, the Governor of Arkansas also appoints every member of ASLA s board of directors. See id. § 6-81-102(d). The fact that all of [an entity s] decisionmakers are appointed by the Governor, we have recognized, is a key indicator of state control. Md. Stadium Auth., 407 F.3d at 264; see also, Hoover, 353 F.3d at 307; Kitchen, 286 F.3d at 185; Cash, 242 F.3d at 225. The dissent all but ignores this fact, claiming instead that ASLA is autonomous because its board members serve fixed terms and may not be removed at will. This argument terms, state fails. Even authority to where board appoint Dissent. Op. at 56. members all of serve an fixed entity s of state funds used to support ASLA s operations matters not. What matters is whether an entity s funds belong to the state. See supra at 25-26. In this case, state law expressly provides that they do. Every dollar ASLA earns through its lending activities becomes a dollar of state revenue to be used as required and to be expended only for such purposes and in such manner as determined by law. Ark. Code Ann. § 19-6-103. That Arkansas, in its discretion, returns some of this money to ASLA to finance its operations does not change that fact. 28 decisionmakers remains powerful evidence of state control. See Md. Stadium Auth., 407 F.3d at 258, 264 (stressing importance of power to appoint terms ). the although board members serve five year Arkansas law, moreover, is equivocal with respect to governor s removal power. Indeed, it suggests that the governor may remove board members simply by selecting new ones, as appointments to ASLA s board until a successor is appointed. are for four-year terms or Ark. Code Ann. § 6-81-102(e). Third, with respect to whether ASLA is focused on state concerns, Dr. Oberg merely alleges that Arkansas law allows ASLA to lend to any qualified borrower nationwide and that ASLA can and has entered into contracts with institutions outside Arkansas. The operative question, however, is whether ASLA is primarily involved with state concerns. at 459. See Ram Ditta, 822 F.2d And Dr. Oberg has alleged no facts indicating that ASLA is not primarily involved with the state concern of helping to finance higher education for Arkansas residents. while conceding that student-loan financing The dissent, facilitates the important state goal of educating youth, maintains that ASLA is also engaged federal in student federal-loan non-state loans. servicing work concerns Dissent. did not like Op. at begin the servicing 55. But until 2012, of ASLA s so is irrelevant to the question whether ASLA was a person within 29 the meaning of the FCA from 2002 to 2006 when it allegedly violated the Act. Fourth, as the dissent agrees, Arkansas law plainly treats ASLA as an arm of the state. ASLA was established by state law as the instrumentality of the state charged with a portion of the responsibility opportunities. of Ark. the Code state Ann. to § provide 6-81-102(c). educational Its lending revenues are statutorily defined as revenues of the state, id. §§ 6-81-118, 19-6-103, and the Supreme Court of Arkansas has described ASLA as a state agency created by . . . the 1977 Acts of Arkansas, Turner v. Woodruff, 689 S.W.2d 527, 528 (Ark. 1985). In short, we conclude that each of the four factors counsels in favor of holding that ASLA is an arm of the state. To be sure, as the dissent points out, arm-of-the-state analysis is a fact-intensive inquiry often ill suited to judgment on the pleadings. See Dissent. Op. at 58-59. But where, as with ASLA, the relevant facts are clear, Rule 12(b)(6) mandates dismissal. See, e.g., Stoner, 502 F.3d at 1121-23 (dismissing FCA action on 12(b)(6) therefore motion); hold Adrian, that ASLA 363 is an subject to suit under the FCA. 30 F.3d at 401-02 arm of Arkansas (same). We and not so VI. We affirm the judgment of the district court with respect to ASLA. We vacate that portion of the district court s judgment dismissing Dr. Oberg s FCA claims against PHEAA and VSAC and remand for further proceedings consistent with this opinion. AFFIRMED IN PART, VACATED IN PART, AND REMANDED 31 TRAXLER, Chief Judge, concurring in the judgment in part and dissenting in part: This is an appeal from the granting of a Rule 12(b)(6) motion to dismiss, a motion that tests the plausibility of the plaintiff s allegations rather than the plaintiff s ability to ultimately prove his allegations or the defendant s ability to establish a defense. In my view, plaintiff Jon Oberg s Fourth Amended Complaint plausibly alleges that all of the defendant student-loan corporations (together, the Loan Companies ) are persons against whom an action under the False Claims Act (the FCA ) can be maintained. Whether the Loan Companies qualify as arms of their creating states is an affirmative defense that need not be anticipated or negated by the allegations of the complaint, see Goodman v. Praxair, Inc., 494 F.3d 458, 466 (4th Cir. 2007) (en banc), and is a question that cannot be finally resolved here without discovery and fact-finding by the district court. Accordingly, vacating the asserted against I concur dismissal the of in that Oberg s Pennsylvania portion False Higher of the Claims Education Act judgment claims Assistance Agency ( PHEAA ) and the Vermont Student Assistance Corporation ( VSAC ), but I dissent from the dismissal of the claims asserted against the Arkansas Student Loan Authority ( ASLA ). 32 I. The purpose sufficiency of of a a Rule 12(b)(6) complaint ; the motion motion is does to test not the resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses. Butler v. United States, 702 F.3d 749, 752 (4th Cir. 2012) (internal quotation marks omitted), cert. denied, 133 S. Ct. 2398 (2014). To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must allege facts plausibly establishing the elements of his asserted cause of action. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012), cert. denied, 133 S. Ct. 1493 (2013). While the plaintiff is not required to forecast evidence sufficient to prove the elements of the claim, he must allege sufficient facts to establish those elements and advance across the line from conceivable to plausible. F.3d at 439 (internal quotation marks [his] claim Walters, 684 omitted). When considering a motion to dismiss, we give no deference to legal conclusions asserted in the complaint, but we must accept all factual allegations as true. See id. II. Broadly speaking, the False Claims Act imposes liability on a person who knowingly presents a false or fraudulent claim 33 for payment statement or knowingly material § 3729(a)(1)(A) & to (B). makes a or false In uses a false claim. order to record See survive 31 the or U.S.C. motion to dismiss, Oberg was therefore obliged to plead facts plausibly establishing that the named defendants are persons within the meaning of the FCA. While states are not persons subject to qui tam actions under the FCA, see Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 787-88 (2000), corporations, including municipal corporations like cities and counties, are persons under the Act, see Cook Cnty. v. United States ex rel. Chandler, 538 U.S. 119, 134 (2003); see also 1 U.S.C. § 1 ( In determining the meaning of any Act of Congress, unless the context indicates otherwise[,] . . . the word[] person . . . include[s] corporations . . . . ). There is no dispute that each of the Loan Companies is a corporation, and Oberg alleged the corporate status of each Loan Company in his complaint. Because corporations are presumed to be persons under the FCA, Chandler, status 538 U.S. plausibly at 126, Oberg s established that allegations the Loan of corporate Companies are persons within the meaning of the FCA, see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) ( Factual allegations must be enough to raise a right to level. ). 34 relief above the speculative The Loan alter-egos Companies, or arms of however, their all creating contend that states. The they are Companies therefore argue that they, like the states themselves, do not qualify as persons under the FCA. Arm-of-state status is an Eleventh-Amendment-based inquiry focused on determining whether a state-created entity is so closely related to the state that it should immunity. be permitted to share in the state s sovereign See United States ex rel. Oberg v. Ky. Higher Educ. Student Loan Corp., 681 F.3d 575, 580 (4th Cir. 2012) ( Oberg I ). Although this court has not addressed the issue, the circuits that have considered similar assertions of arm-of-state status have uniformly concluded that it is an affirmative defense to be raised and established by the entity claiming to be an arm of the state. Dentistry, 692 F.3d 828, See Sung Park v. Ind. Univ. Sch. of 830 (7th Cir. 2012) ( [S]overeign immunity is a waivable affirmative defense. ); Aholelei v. Dep t of Pub. Safety, 488 F.3d 1144, 1147 (9th Cir. 2007) ( Eleventh Amendment immunity is an affirmative defense . . . . (internal quotation marks omitted)); Woods v. Rondout Valley Cent. Sch. Dist. Bd. of Educ., 466 F.3d 232, 237-39 (2d Cir. 2006) (treating Eleventh Amendment immunity as akin to an affirmative defense ); see also Gragg v. Ky. Cabinet for Workforce Dev., 289 F.3d 958, 963 (6th Cir. 2002) ( [T]he entity asserting Eleventh Amendment immunity has the burden to show that it is entitled to 35 immunity, i.e., that it is an arm of the state. ); Skelton v. Camp, 234 F.3d 292, 297 (5th Cir. 2000) (holding that the party seeking immunity bear[s] the burden of proof in demonstrating that [it] is an arm of the state entitled to Eleventh Amendment immunity ); Christy v. Pa. Turnpike Comm n, 54 F.3d 1140, 1144 (3d Cir. 1995) ( [T]he party asserting Eleventh Amendment immunity (and standing to benefit from its acceptance) bears the burden of proving its applicability. ). I believe these decisions were correctly decided and that the arm-of-state issue raised by the Loan Companies is an affirmative defense. 1 Preliminarily, although a plaintiff must plead facts establishing that the court has jurisdiction over his claim, see, e.g., Pinkley, Inc. v. City of Frederick, 191 F.3d 394, 399 (4th Cir. 1999), jurisdictional. the arm-of-state issue here is not Instead, as the Supreme Court made clear in Stevens, it is a statutory question of whether the defendants named by Oberg qualify as persons under the FCA. See Stevens, 529 U.S. at 779 (distinguishing the question whether the FCA 1 In our first opinion, we concluded that the district court had not applied the arm-of-state analysis, and we remanded the case for the district court to apply that analysis in the first instance. See United States ex rel. Oberg v. Ky. Higher Educ. Student Loan Corp., 681 F.3d 575, 581 (4th Cir. 2012). While we noted that the ultimate question of whether the Loan Companies were subject to suit under the FCA did not turn solely on their corporate status, see id. at 579, we did not consider the sufficiency of Oberg s allegations or address whether arm-ofstate status was an affirmative defense. 36 permits actions against states from whether the Eleventh Amendment would prohibit such an action and electing to resolve the case on statutory grounds). Moreover, the arm-of-state claim operates like other affirmative defenses, in that the claim would preclude liability even if all of Oberg s allegations of wrongdoing are true. See Emergency One, Inc. v. Am. Fire Eagle Engine Co., 332 F.3d 264, 271 (4th Cir. 2003) ( [A]ffirmative defenses share the common characteristic of a bar to the right of recovery even if the general complaint were more or less admitted to. (internal quotation marks and alteration omitted)); Black s Law Dictionary (9th ed. 2009) (defining affirmative defense as [a] defendant s assertion of facts and arguments that, if true, will defeat the plaintiff s or prosecution s claim, even if all the allegations in the complaint are true. ). arm-of-state status asserted by the treated as an affirmative defense. In my view, then, the Loan Companies must be And once the arm-of-state issue in this case is recognized as an affirmative defense, the error in dismissing Oberg s claims on the pleadings becomes apparent. As noted above, a Rule 12(b)(6) motion test[s] the sufficiency of a complaint but does not resolve contests . . . [about] the merits of a claim or the applicability of defenses. Butler, 702 F.3d at 752 (internal quotation marks omitted). 37 A plaintiff therefore has no obligation to anticipate an affirmative defense by pleading facts that would refute the asyet unasserted defense. Gomez v. Toledo, 446 U.S. 635, 640 (1980); see McMillan v. Jarvis, 332 F.3d 244, 248 (4th Cir. 2003); Guy v. E.I. DuPont de Nemours & Co., 792 F.2d 457, 460 (4th Cir. 1986); accord de Csepel v. Republic of Hungary, 714 F.3d 591, 607-08 (D.C. Cir. 2013) ( [A]lthough it is certainly true that plaintiffs must plead the elements of their claims with specificity, they are not required to negate an affirmative defense in their complaint . . . . (internal quotation marks and alteration omitted)). As our en banc court explained in Goodman, an affirmative defense may provide the basis for a Rule 12(b)(6) dismissal only in the relatively rare circumstances . . . [where] all facts necessary to the affirmative defense clearly appear on the face of the complaint. Goodman, 494 F.3d at 464 (internal quotation marks and alteration omitted); see also Xechem, Inc. v. Bristol Myers Squibb Co., 372 F.3d 899, 901 (7th Cir. 2004) ( Only when the plaintiff pleads itself out of court--that is, admits all the ingredients of an impenetrable defense--may a complaint that otherwise states a claim be dismissed under Rule 12(b)(6). ). Application of these principles to this case requires Oberg to plausibly allege that the Loan Companies are persons within the meaning of the FCA. Oberg did just that by alleging that 38 the Companies are corporations operating independently of their creating states. are alter-egos defense which The Loan Companies contrary claim that they of they their bear creating the burden states of is an pleading affirmative and proving. Because Oberg had no obligation to anticipate that defense by alleging facts establishing that the multi-factored, factually intensive arm-of-state inquiry should be resolved in his favor, the dismissal of his claims at this stage of the proceedings is improper. See Butler, 702 F.3d at 752; Goodman, 494 F.3d at 464, 466. 2 2 The majority s apparent view that arm-of-state status is an affirmative defense in the Eleventh Amendment context but not in this case is puzzling. Although the arm-of-state inquiry here presents a statutory rather than constitutional question, the principles at stake are the same as in any case raising Eleventh Amendment issues. If arm-of-state status is a waivable affirmative defense when the Eleventh Amendment is directly implicated, so too should it be a waivable affirmative defense when the Eleventh Amendment is indirectly implicated. While personhood is clearly an element of a plaintiff s claim under the FCA, Oberg, as previously discussed, carried his burden of demonstrating the Loan Companies personhood by alleging their independent corporate status. The burden should then fall to the defendants to plead and prove that they are not persons but rather are arms of their creating state. United States ex rel. Adrian v. Regents of University of California, 363 F.3d 398 (5th Cir. 2004), the case relied on by the majority, does not suggest otherwise. In that case, the plaintiff brought an FCA action against an entity the Regents of the University of California that courts had repeatedly found to be an arm of the state. See id. at 401-02. The Fifth Circuit did not address the affirmative-defense issue, but its affirmance of a Rule 12(b)(6) dismissal of the claims against an entity previously found to be an arm of the state is consistent with the rule recognized by this court in Goodman that an affirmative defense may be (Continued) 39 III. Even if Oberg were somehow required to allege that the Loan Companies are not arms of their states, I believe the allegations of the complaint are still more than sufficient to withstand the motion to dismiss. As to PHEAA and VSAC, the majority concludes that Oberg s allegations plausibly establish that alter-egos of their creating states. the companies are not Although I agree with the majority s ultimate conclusion as to these defendants, I do not agree with the majority s application of standard to the arm-of-state state factors. the Rule 12(b)(6) The sufficiency of the complaint as to PHEAA and VSAC is not a close question in my view, and I therefore concur only in the judgment vacating the dismissal of Oberg s claims against PHEAA and VSAC. While the question is perhaps a bit closer as to the claims against ASLA, I nonetheless believe the Oberg has plausibly alleged facts establishing that ASLA is not an arm of the state of Arkansas. Accordingly, for the reasons set out below, I dissent from the majority s affirmance of the Rule 12(b)(6) dismissal of Oberg s claims against ASLA. resolved on a Rule 12(b)(6) motion when the facts necessary to the defense appear on the face of the complaint. See Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc). 40 When determining whether an entity qualifies as an arm of the state, we consider four non-exclusive factors: (1) whether any judgment against the entity as defendant will be paid by the State or whether any recovery by the entity as plaintiff will inure to the benefit of the State; (2) the degree of autonomy exercised by the entity, including such circumstances as who appoints the entity s directors or officers, who funds the entity, and whether the State retains a veto over the entity s actions; (3) whether the entity is involved with state concerns as distinct from non-state concerns, including local concerns; and (4) how the entity is treated under state law, such as whether the entity s relationship with the State is sufficiently close to make the entity an arm of the State. Oberg I, 681 F.3d at 580 (quoting Dep t of Disabilities & Special Needs v. Hoover Universal, Inc., 535 F.3d 300, 303 (4th Cir. 2008)). While the focus of the first factor is whether the primary legal liability for a judgment will fall on the state, Regents of Univ. of Ca. v. Doe, 519 U.S. 425, 428 (1997), we must also consider the practical effect of a judgment against the entity, see Hess (1994). v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 51 [I]f the State treasury will be called upon to pay a judgment against a governmental entity, then Eleventh Amendment immunity applies to that entity, and consideration of any other factor becomes unnecessary. Educ., 242 F.3d 219, 223 Cash v. Granville Cnty. Bd. of (4th 41 Cir. 2001). [S]peculative, indirect, and ancillary impact[s] on the State however, are insufficient to trigger immunity. treasury, Id. at 225. If the state would not be liable for a judgment rendered against the entity, we must then consider the remaining factors, which serve to determine whether the entity is so connected to the State that the legal action against the entity would, despite the fact that the judgment will not be paid from the State treasury, amount to the indignity of subjecting a State to the coercive process of judicial tribunals at the instance of private parties. Id. at 224 (internal quotation marks omitted); see Fed. Mar. Comm n v. S.C. State Ports Auth., 535 U.S. 743, 760 (2002) ( The preeminent purpose of state sovereign immunity is to accord States the dignity that is consistent with their status complaint as sovereign contains entities. ). factually detailed, In my view, specific Oberg s allegations addressing the treasury factor and the dignity factors so as to preclude the granting of the motion to dismiss. A. The complaint alleges that ASLA, not its creating state, would be liable for any judgment rendered against it. 116-18. See J.A. While that assertion is arguably a legal conclusion not entitled to be treated as true, see, e.g., Iqbal, 556 U.S. at 678, the assertion is supported by specific factual allegations that are supported by statutes, financial reports, and other 42 information specifically referenced in the complaint and properly considered in the context of a motion to dismiss. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Philips v. Pitt Cnty. Mem l Hosp., 572 F.3d 176, 180 (4th Cir. 2009). These allegations and information establish the following: ASLA is a corporation entitled to enter into contracts, own property, and sue and be sued in its own name. See Ark. Code Ann. § 6-81-102(c) (establishing ASLA as a public body politic and corporate, with corporate succession ). Arkansas has specifically disclaimed liability for ASLA s obligations. See Ark. Code Ann. § 6-81113(a)(3). Arkansas law authorizes ASLA to pay expenses associated with its lending activities from the revenues earned from those activities. See Ark. Code Ann. §§ 6-81118(c)(3), 6-81-124(c)(1). ASLA generates substantial income streams and relies on those income streams, rather than state appropriations, to support its business operations, and ASLA has substantial assets from which a judgment could be paid. See J.A 781-827 (ASLA financial statements). ASLA has a line of credit provided by Arkansas. ASLA borrowed $50,000,000 under the line of credit in 2008 and repaid the note in full by September 2010. See J.A. 802. ASLA has also borrowed money from a private lender to improve its liquidity, with student loan revenues providing the source of repayment. See J.A. 802. ASLA has commercial insurance to protect itself from losses arising out of torts and its errors and omissions. See J.A. 805. In my view, these allegations are more than sufficient to make plausible Oberg s assertion that 43 the Arkansas state treasury would not be liable for a judgment rendered against ASLA. See Robertson v. Sea Pines Real Estate Cos., 679 F.3d 278, 288 (4th Cir. 2012) ( Plausibility requires that the factual allegations be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true. (internal quotation marks and alteration omitted)). Although the majority considers ASLA s status as a corporation only when analyzing the state-dignity factors, that fact is clearly relevant to the state-treasury factor as well. See Cash, 242 F.3d at 224 (considering entity s corporate form when analyzing state-treasury factor). The fact that Arkansas elected to structure ASLA as a corporation makes it plausible that the state will not be liable for any judgments in this case, since insulating others from liability for corporate debt is one of the signal attributes of the corporate form. See, e.g., Musikiwamba v. ESSI, Inc., 760 F.2d 740, 753 (7th Cir. 1985) ( General corporation law is clear that personal liability for a corporation s debts cannot be imposed on a person merely because he is an officer, shareholder, and incorporator of that corporation. ). That liability ASLA s for plausibility, Arkansas particularly has obligations given the specifically disclaimed further establishes absence of requiring Arkansas to pay a judgment against ASLA. any statute See Cash, 242 F.3d at 224-25 (noting the absence of statute authorizing 44 recovery from state coffers when concluding that judgment against entity would not affect state treasury); Gray v. Laws 51 F.3d 426, 436 (4th Cir. 1995) (noting the absence of statute requiring payment by state). Moreover, the allegations of the complaint and the financial documents referenced in the complaint show that ASLA generates significant revenue streams through its lending and other business required by activities. activities. state law, to ASLA pay the uses those expenses of revenues, its as business In light of these revenue streams, ASLA s ability to raise revenues through other sources, see J.A. 802 (line of credit and private lending available to ASLA), and its insurance protection, it is entirely plausible a judgment in this case will have no legal or practical effect on the Arkansas state treasury. See Burrus v. State Lottery Comm n, 546 F.3d 417, 420 (7th Cir. 2008) (concluding that state lottery commission was not an arm of the state, in part because the lottery has no need for recourse to the state treasury given the large stream of revenue it generates). B. The allegations of Oberg s complaint likewise plausibly demonstrate that ASLA has significant autonomy and independence from its creating state. The allegations of the complaint and the documents referenced therein establish the following: 45 ASLA is a corporation entitled to enter into contracts, own property, and sue and be sued in its own name. See Ark. Code Ann. § 6-81-102(l). ASLA is governed by a board of directors, none of whom are state officials, who serve fixed terms and are not removable by the governor. See id. § 6-81-102(d) & (e). ASLA has authority to structure and operate business activities as it deems proper, including authority to issue general obligation bonds secured by revenues and to create subsidiary corporations. See §§ 6-81-102(k), 6-81-102(l)(8)-(10) & (25). its the its id. ASLA is supported by the revenues it earns from its business activities, not by the state. Although ASLA receives appropriations from the state earmarked for salaries and certain operating expenses, the funds so appropriated are cash funds earned by ASLA through its business activities. See Ark. Code Ann. § 6-18-118; J.A. 412. ASLA s revenues are not deposited into the state treasury, but are deposited into various accounts controlled by ASLA. See Ark. Stat. § 6-81-118(a) & (f). ASLA s business activities extend outside the state of Arkansas and include the buying and selling of loan pools on the secondary market and the servicing of loans made directly by the federal government. ASLA has borrowed and repaid money from the state of Arkansas, executing a promissory in favor of the state and using its revenues to repay the loan. See J.A. 802. These need not allegations be accepted are as not naked true, nor conclusions that can be disregarded. 678. that factual are assertions they mere that legal See Iqbal, 556 U.S. at Instead, they are specific, detailed factual allegations paint operating a in plausible the picture commercial of sphere an 46 autonomous largely free corporation of state oversight or interference, such that it would not be an affront to the dignity of Arkansas to permit this action to proceed. Accordingly, given the operational independence established by these allegations, and the financial independence established by the state-treasury allegations discussed above, I believe it is at least plausible that ASLA is a person within the meaning of the FCA, not an arm of the state of Arkansas. See id. ( A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. ). IV. ASLA, however, makes various arguments about how a judgment could affect the state treasury and points to various statutes indicating that the state has more control over it than Oberg s allegations suggest. In my view, these arguments do not provide a basis for granting the motion to dismiss. Even after Twombly and Iqbal, we still must view the properly alleged facts in the plaintiff s favor and must give the plaintiff the benefit of all reasonable inferences that can be drawn from those facts. See E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011); see also Sepulveda Villarini v. Dep t. of Educ. of P.R., 628 F.3d 25, 30 (1st Cir. 2010) (Souter, J.) ( A plausible but inconclusive inference from pleaded facts will 47 survive a motion to dismiss . . . . ). are not frivolous, they are not so While ASLA s arguments conclusive as to render Oberg s allegations implausible for purposes of Rule 12(b)(6). See Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) ( Plaintiff s complaint may be dismissed only when defendant s plausible alternative explanation is so convincing that plaintiff s explanation is implausible. ); Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452, 458 (6th Cir. 2011) ( [T]he plausibility of [the defendants theory] does not render all other reasons implausible. ). A. ASLA argues that a judgment against it would affect the state treasury. Arkansas law requires the revenues from ASLA s business activities to be deposited into accounts outside the state treasury. See Ark. Code Ann. § 6-81-118(a), (b) & (f). Under provisions of Arkansas law not exclusively applicable to ASLA, all funds required to be deposited somewhere other than the state treasury are cash funds that are declared to be revenues of the state to be used as required and to be expended only for such purposes and in such manner as determined by law. Ark. Code Ann. § 19-6-103. Such cash funds must be budgeted and proposed expenditures approved by enactments of the General Assembly. Id. § 19-4-802(a). Relying on these statutes, ASLA contends that a judgment against it is, as a practical matter, a 48 judgment against Arkansas, since all of ASLA s money is really the state s money under § 19-6-103. ASLA s argument overlooks several important points. First of all, as the majority noted in its discussion of PHEAA s armof-state assertion, the fact that ASLA s funds are held in a segregated fund outside the state treasury counsels against armof-state status. See Majority Op. at 13-14; see also Burrus, 546 F.3d at 420; Univ. of R.I. v. A.W. Chesterton Co., 2 F.3d 1200, 1210 applicable (1st § Cir. 1993). 19-6-103, the Moreover, statute unlike the specifically generally addressing ASLA s funds does not declare ASLA s cash funds to be revenues of the state, see Ark. Code Ann. § 6-18-118, and nothing in § 618-118 appears to subject ASLA s use of the funds to wholesale control by the General Assembly. 3 Instead, § 6-18-118 simply requires ASLA s segregated cash funds to be used as provided in this subchapter subchapter 1 of Chapter 81 governing student loans. Id. § 6-18-118(b) (emphasis added). Subchapter 1, in turn, gives ASLA -- not the state legislature -- nearly complete authority over the use of its funds, including the authority to pay expenses arising from its lending activities. 3 See Ark. Code As the majority recognized when considering PHEAA s claim, the terms of the statute specifically governing ASLA should be given priority over the generally applicable § 19-6-103. See Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992) ( [I]t is a commonplace of statutory construction that the specific governs the general . . . . ). 49 Ann. § 6-81-118(c)(3) & (4) (giving ASLA authority to use the proceeds of any bond issues, together with any other available funds for loans and [p]aying incidental [p]aying expenses expenses of in connection authorizing and with issuing bonds ); id. § 6-81-118(f) ( The revenues not deposited into the State Treasury shall be deposited into an account or accounts specified by resolution of the authority and used for carrying out the provisions of any resolution, indenture securing bonds of the authority, or other agreement of the authority under this subchapter. ); id. § 6-81-124(a) (requiring [a]ll proceeds derived from a particular obligation to be deposited into a proceeds fund to be expended only on approval of [ASLA] ); id. § 6-81-124(c)(1) (authorizing funds contained in proceeds fund to including, be used without for payment limitation, of the the necessary costs of expenses, issuing the authority s obligations, incurred by the authority in carrying out its responsibilities under this subchapter ). 4 4 Arkansas statutory arrangement thus is similar in many ways to that in Pennsylvania. Like Arkansas, Pennsylvania law appears to treat the Loan Company s funds as state funds, see 24 Pa. Cons. Stat. § 5104(3) (requiring PHEAA s funds to be deposited into state treasury), and to require state approval of any expenditure of those funds, see 72 Pa. Cons. Stat. § 307, but the statute specifically governing PHEAA s operation gives control of those funds to the company, see 24 Pa. Cons. Stat. § 5104(3); see Majority Op. at 11-13 (describing operation of Pennsylvania statutes governing PHEAA). After considering Pennsylvania s statutory structure, the majority concluded that (Continued) 50 More importantly, however, the fact that Arkansas declares all of ASLA s cash funds to be state funds does not conclusively establish that the Arkansas state treasury would be affected by a judgment against ASLA in this case. As shown by the relevant statutes and other information in the record, the cash funds claimed by the state consist entirely of revenues generated by ASLA s lending and other business activities. And because the expenses of those business activities must be paid from the cash funds, the funds so claimed by the state in reality consist only of ASLA s surplus revenues. As the Supreme Court has explained, however, the statetreasury factor focuses not on the use of profits or surplus, but rather . . . on losses and debts. (emphasis added)). If the Hess, 513 U.S. at 51 expenditures of the enterprise exceed receipts, is the State in fact obligated to bear and pay the resulting indebtedness of the enterprise? When the answer is No -- both legally and practically -- then the Eleventh Amendment s core concern is not implicated. Id. The majority s assertion that the source of the cash funds claimed by Arkansas does not matter because Arkansas claims all the state-treasury factor weighs heavily against holding that PHEAA is an arm of the state. Majority Op. at 14. In my view, Arkansas similar statutory scheme also weighs against arm-ofstate status. 51 of the cash funds as its own, see Majority Op. at 27-28 n.7, thus seems directly contrary to the Supreme Court s analysis in Hess. that Under the majority s view, a self-supporting entity is, an entity appropriations but that supports through the itself revenues not through earned from state its own commercial activities is dependent on the state as a matter of law because a state statute arguably profits to be revenues of the state. declares the entity s The Supreme Court raised a suspicious eyebrow at such an argument in Hess, see 513 U.S. at 51 n.21 (observing that [i]t would indeed heighten a mystery of legal evolution were we to spread an Eleventh Amendment cover over an agency that consumes no state revenues but contributes to the State s wealth (internal quotation marks and alteration omitted)), and the argument is no more persuasive here. Oberg s allegations of a self-supporting, commercially insured corporation with tens of millions of dollars in annual revenue and access to a $50 million line of credit and other private that loans ASLA provide would not rendered against it. 5 point in the a non-speculative need Arkansas s basis help to for pay concluding a judgment Nothing more need be established at this proceedings. See 5 Twombly, 550 U.S. at 555 Indeed, the financial statements referenced in the pleadings show that ASLA absorbed an operational loss in 2011 without any financial assistance from the state. See J.A. 790. 52 ( Factual allegations must be enough to raise a right to relief above the speculative level. ); Walters, 684 F.3d at 439 (plaintiff s allegations must be sufficient to advance [his] claim across the line from conceivable to plausible ). B. The state-dignity factors of the arm-of-state inquiry include (1) the degree of autonomy exercised by the entity ; (2) whether the entity is involved with state concerns as distinct from non-state concerns, including local concerns ; and (3) how the entity is treated under state law. F.3d at 580. Oberg I, 681 As previously discussed, I believe that Oberg s allegations of a corporate entity that is answerable to boards of directors rather than elected state officials and that operates largely free of state interference plausibly establish that ASLA is not so connected to the State that the legal action against the entity would, despite the fact that the judgment will not be paid from the State treasury, amount to the indignity of subjecting a State to the coercive process judicial tribunals at the instance of private parties. of Cash, 242 F.3d at 224 (internal quotation marks omitted). I recognize, however, that other inferences can reasonably be drawn contained from in the the information record. alleged Nonetheless, in the the complaint question at and this stage of the proceedings is not whether the defendant s view of 53 the issues is reasonable, but whether the plausibly alleged an entitlement to relief. plaintiff has See, e.g., Butler 702 F.3d at 752 (motion to dismiss test[s] the sufficiency of a complaint but does not resolve contests surrounding the facts, the merits of a claim, or the applicability (internal quotation marks omitted)). dignity factors do not of defenses And in my view, the state- conclusively establish that the Loan Companies are arms of their creating states, notwithstanding the fact that some of the factors might reasonably support that conclusion. For example, agency. an Arkansas to treat ASLA as a state See Ark. Code Ann. § 6-81-102(c) (describing ASLA an instrumentality S.W.2d appears 527, agency ). 528 of the (Ark. state ); 1985) Turner (describing v. ASLA Woodruff, as a 689 state While this factor thus points toward a finding of arm-of-state status, whether an entity qualifies as an arm of its creating state is a matter of federal law, see Regents, 519 U.S. at 429 n.5, and this single factor is not dispositive of the inquiry. In addition, there can be no dispute that ASLA is involved, at least in part, in matters of statewide concern. [E]ducating the youth of a state and providing higher education is clearly an area of statewide concern, Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 265 (4th Cir. 2005), and making loans 54 available to students certainly facilitates that goal. However, ASLA is also engaged in other, more commercial activities, such as the buying and selling of loan pools on the secondary market and the servicing of federal student loans, that arguably are more appropriately characterized as non-state concerns. See Hoover the Universal, 535 F.3d at 307 (considering whether entity is involved with statewide, as opposed to local or other non-state concerns (emphasis added)); cf. Fresenius Med. Care Cardiovascular Res., Inc. v. Puerto Rico, 322 F.3d 56, 64 (1st Cir. 2003) ( Not all entities created by states are meant to share state sovereignty. . . . commercial enterprises, Some entities may be meant to be viable and competitive in the that ASLA on state marketplace in which they operate. ). As generates to the its question own of revenues autonomy, and is the not fact dependent appropriations is a strong indication of the Loan Companies operational independence from the states. While ASLA receives an and appropriation earmarked for salaries certain other expenses, it is an appropriation of ASLA s own cash funds, J.A. 412, which, as previously discussed, are funds generated by ASLA through its business activities. That kind appropriation does not make ASLA dependent on the state. of See Burrus, 546 F.3d at 422 (appropriation of funds generated by entity claiming arm-of-state status is of a different kind than 55 the appropriations we have found to be the mark of a state agency, namely, those appropriations that come directly from the state. (internal quotation marks omitted)). 6 Other facts, however, suggest that ASLA is not entirely autonomous. For example, all members of ASLA s board of directors are appointed by the governor, see Ark. Stat. Ann. § 6-81-102(d), a fact that clearly provides some indication of state control. See Md. Stadium Auth., 407 F.3d at 264. Arkansas law, however, provides that the board members serve fixed terms, see Ark. Stat. Ann. § 6-81-102(e), with no suggestion that they may be removed by the governor at will. 7 See Edmond v. United States, 520 U.S. 651, 664 (1997) ( The power to remove officers, we have recognized, is a powerful tool 6 In any event, even if ASLA did receive some money from the state, that fact alone would not conclusively establish that ASLA is dependent on the state. See, e.g., Kitchen v. Upshaw, 286 F.3d 179, 184-85 (4th Cir. 2002) (finding that an entity that received some state funding was not an arm of the state); Cash, 242 F.3d at 224, 226 (same). 7 According to the majority, the fact that ASLA board members serve for four years or until a successor is appointed, Ark. Code § 6-81-102(e), suggests that the governor may remove board members simply by selecting new ones. Majority Op. at 29 (emphasis added). It seems highly unlikely that the Arkansas legislature would hide removal-at-will authority in a clause that more reasonably seems to authorize terms of more than four years in cases where an appointment is not timely made. In any event, an ambiguous statutory scheme is far from sufficient to establish for purposes of a Rule 12(b)(6) motion that ASLA s board is subject to the direct control of the governor. 56 for control. ); Auer v. Robbins, 519 U.S. 452, 456 n.1 (1997) (concluding that Board of Police Commissioners was not an arm of the state because the state was not responsible for the Board s financial liabilities and the only form of state control was the governor s power to appoint four of five Board members); P.R. Ports Auth. v. Fed. Mar. Comm n, 531 F.3d 868, 877 (D.C. Cir. 2008) ( The Governor s power to remove a majority of the Board at will allows him to directly supervise and control PRPA s ongoing operations. ); Takle v. Univ. of Wisc. Hosp. & Clinics Auth., 402 F.3d 768, 770 (7th Cir. 2005) ( [T]he power to appoint is not the power to control. ). 8 In addition, all bonds issued by ASLA must be approved by the governor, Majority Op. requirement a at among fact the 27-28 the with little autonomy ). majority (including facts finds significant. gubernatorial establishing that ASLA See approval operates The approval requirement, however, is a function of federal law, which places a ceiling on the volume of 8 Contrary to the majority s characterization of my views, I do not contend that ASLA is autonomous because of the manner in which its board is appointed, Majority op. at 28 (emphasis added), only that Oberg has alleged specific facts relevant to ASLA s autonomy sufficient to survive a Rule 12(b)(6) motion. As I have previously discussed, the fact that other inferences can be drawn from the information in the record does not render Oberg s allegations implausible. See Sepulveda Villarini v. Dep t. of Educ. of P.R., 628 F.3d 25, 30 (1st Cir. 2010) (Souter, J.) ( A plausible but inconclusive inference from pleaded facts will survive a motion to dismiss . . . . ). 57 certain tax-exempt private activity bonds (including student loan bonds) that can be issued within a state and vests with the state governor the authority to change the allocation of the state ceiling among issuers, and which requires state approval of such bond issues. See 26 U.S.C. § 141(e)(1)(E); id. § 144(b); id. § 146(a)-(e); id. § 147(f); see generally Steele v. Indus. Dev. Bd. of Metro. Gov t Nashville, 301 F.3d 401, 404 (6th Cir. 2002); Congressional Research Service, Tax-Exempt Bonds: A Description of State & Local Government Debt at 9-11 (June 19, 2012). Under these circumstances, the gubernatorial- approval requirement is less indicative of a lack of autonomy than it might otherwise be. In any event, the gubernatorial- approval requirement does not conclusively establish that ASLA lacks autonomy. Thus, on the record before us, the facts relevant to the state-dignity factors cut both ways, with some supporting Oberg s claim that ASLA is not an arm of the state, and others supporting ASLA s contrary claim. But because Oberg s allegations on this point more than satisfy the Iqbal-Twombly plausibility requirement, ASLA s arguments provide no basis for affirming the dismissal of Oberg s claims. 58 V. As is apparent from the arm-of-state test itself and the nature of the considerations it entails, whether a state-created entity is so closely connected to its creating state that it should be permitted to share in the state s immunity from suit generally is a fact-intensive inquiry dependent on an understanding of the actual operations of the entity and the actual relationship between e.g., 513 U.S. and actual Hess, anticipated the at entity 49 and the (considering financial state. the independence See, entity s (emphasis added)); Hoover, 535 F.3d at 303 ( The line separating a Statecreated entity functioning independently of the State from a State-created entity functioning as an arm of the State or its alter ego is determined by the particular legal and factual circumstances of the entity itself. (emphasis added)); Gray, 51 F.3d at 434 (remanding case to the district court because it was in the best position to address in the first instance the competing questions of fact and state law necessary to resolve the eleventh omitted)). amendment issue (internal quotation marks While there certainly have been and will continue to be cases where the arm-of-state issue can be resolved on the pleadings, multi-factored balancing tests do[] not easily lend [themselves] to dismissal on a Rule 12(b)(6) motion. v. Whittemore, 635 F.3d 22, 35 n.15 (1st Cir. 2011). 59 Decotiis In my view, this case is one of the typical cases that cannot be resolved on the pleadings. Indeed, the inconclusive nature of most of the state-dignity factors highlights this very problem. We have no information about the actual operations of the Loan Companies or the actual amount of control and oversight exercised by the states and thus cannot determine the actual nature of the relationship between the Loan Companies and their creating states. Nonetheless, the facts as alleged by Oberg plausibly establish that the state treasuries will not be affected by a judgment against the Loan Companies and that the Loan Companies are sufficiently independent from their creating states that permitting this action to proceed would not be an affront to the dignity of the states. To require anything more at this stage of the proceedings is to ignore the purpose and scope of a motion to dismiss, which is to test the facial sufficiency of the complaint, not applicable defenses. resolve contests about the merits or See Butler, 702 F.3d at 752; Goodman, 494 F.3d at 464. Accordingly, while I concur in the judgment insofar as it vacates the dismissal of the claims against PHEAA and VSAC, I dissent from the opinion and judgment affirming the dismissal of the claims against ASLA. 60