Lee Pele v. Pennsylvania Higher Education, No. 14-2202 (4th Cir. 2015)

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UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-2202 LEE PELE, Plaintiff - Appellant, v. PENNSYLVANIA HIGHER EDUCATION American Education Services, ASSISTANCE AGENCY, d/b/a Defendant – Appellee. -----------------------------JON H. OBERG, Amicus Supporting Appellant. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. James C. Cacheris, Senior District Judge. (1:13-cv-01531-JCC-TRJ) Argued: May 12, 2015 Decided: October 21, 2015 Before TRAXLER, Chief Judge, and GREGORY and KEENAN, Circuit Judges. Vacated and remanded by unpublished per curiam opinion. ARGUED: Scott Matthew Michelman, PUBLIC CITIZEN LITIGATION GROUP, Washington, D.C., for Appellant. Paul D. Clement, BANCROFT PLLC, Washington, D.C., for Appellee. ON BRIEF: A. Hugo Blankingship, III, Thomas B. Christiano, BLANKINGSHIP & CHRISTIANO, P.C., Reston, Virginia; Allison M. Zieve, PUBLIC CITIZEN LITIGATION GROUP, Washington, D.C., for Appellant. Jill M. deGraffenreid, McLean, Virginia, Joseph P. Esposito, William E. Potts, Jr., HUNTON & WILLIAMS LLP, Washington, D.C.; George W. Hicks, Jr., Raymond P. Tolentino, BANCROFT PLLC, Washington, D.C., for Appellee. Bert W. Rein, Michael L. Sturm, Christopher M. Mills, Brendan J. Morrissey, Stephen J. Obermeier, WILEY REIN LLP, Washington, D.C., for Amicus Curiae. Unpublished opinions are not binding precedent in this circuit. 2 PER CURIAM: Plaintiff Higher Lee Education Pele filed Assistance suit against Agency the (“PHEAA”) Pennsylvania under Credit Reporting Act, 15 U.S.C. § 1681 et seq. the Fair Concluding that PHEAA was an arm of the Commonwealth of Pennsylvania entitled to share in suit, the judgment the Commonwealth’s district and court dismissed Eleventh-Amendment granted the PHEAA’s action. We immunity motion for from summary vacate the district valid Congressional court’s judgment and remand. I. Absent consent by the state or abrogation, the Eleventh Amendment bars an action in federal court seeking money damages against a state. See, e.g., Bland v. Roberts, 730 F.3d 368, 389-90 (4th Cir. 2013); Lee-Thomas v. Prince George’s Cty. Pub. Sch., 666 F.3d 244, 248 (4th Cir. 2012). “This immunity also protects state agents and state instrumentalities, meaning that it protects arms of the State and State officials.” Bland, 730 F.3d at 389-90 (citations and internal quotation marks omitted)). PHEAA was created by the Commonwealth in 1963 as a “body corporate and government purpose of politic constituting instrumentality,” 24 “improv[ing] access a Pa. to public Stat. § higher corporation 5101, and for the education by originating, financing, and guaranteeing student loans,” United 3 States (“Oberg ex rel. II”), Oberg 745 v. F.3d Pa. 131, Higher 135 Educ. (4th Assistance Cir. Agency 2014). After discovery focusing on the nature of PHEAA’s relationship to the Commonwealth, PHEAA moved for summary judgment, arguing that it is an “arm” of the Commonwealth and therefore protected from Pele’s lawsuit by the Eleventh Amendment. Considering the evidence developed through discovery in light of the factors this court has identified as relevant to the arm-of-state question, see, e.g., Md. Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 261 (4th Cir. 2005), the district court concluded that PHEAA had carried its burden of proving that it is an arm of the Commonwealth, see Hutto v. S.C. Ret. Sys., 773 F.3d 536, 543 (4th Cir. 2014) (holding that in the Eleventh-Amendment context, whether a state-created entity is an arm of its creating state is an affirmative defense that must be proven by the entity asserting immunity). Pele appeals. Pele argues that the evidence and relevant state statutes do not support the district court’s conclusion but instead establish that PHEAA is not an arm of the Commonwealth. II. Whether a state-created entity is an arm of its creating state and therefore entitled to assert the state’s sovereign 4 immunity is a question of law reviewed de novo. Hutto, 773 F.3d at 542. In an opinion also filed today, we addressed PHEAA’s status as an arm of the Commonwealth in connection with claims asserted against PHEAA under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-33. See United States ex rel. Oberg v. Pa. Higher Educ. Assistance Agency (“Oberg III”), No. 15-1093 (4th Cir. filed Oct. 21, 2015). arm of the independent In Oberg III, we concluded that PHEAA is not an Commonwealth from the because: PHEAA Commonwealth and is financially supports itself with revenues generated through PHEAA’s commercial financial-services activities; exercises PHEAA control notwithstanding Pennsylvania directors, is statutorily over its vested commercially the deposit of Treasury; and PHEAA, sets policy and makes these the with and generated fact revenues, revenues through in in the its board of substantive fiscal and operational decisions for the corporation. Although there are some procedural differences between this case and Oberg, the arm-of-state question in Oberg was governed by the same factors applicable here and was otherwise materially identical to the arm-of-state question presented in this case. * * The FCA imposes civil liability on “any person” who makes or presents a false claim for payment to the federal government, 31 U.S.C. § 3729(a)(1), a term that does not include states or (Continued) 5 Because the district court’s analysis is inconsistent with our decision in Oberg III, we hereby vacate the district court’s order and remand for further proceedings on the merits of Pele’s claims against PHEAA. VACATED AND REMANDED state agencies, see Vt. Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765, 787-88 (2000). In Oberg II, we held that because “personhood” is an element of an FCA plaintiff’s case, the FCA plaintiff bears the burden of proving that a state-created entity is not an arm of the state. See Oberg II, 745 F.3d at 136. 6

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