The opinion of the court was delivered by: FOSCHIO
[EDITOR'S NOTE: PART 1 OF 2. THIS DOCUMENT HAS BEEN SPLIT INTO MULTIPLE PARTS ON LEXIS TO ACCOMMODATE ITS LARGE SIZE. EACH PART CONTAINS THE SAME LEXIS CITE.]
REPORT and RECOMMENDATION
This matter was referred to the undersigned on April 24, 1991 by the Honorable Richard J. Arcara for report and recommendation. The matter is presently before the court on the "hospital Defendants'"
motions to dismiss the Second Amended Complaint on grounds of immunity, lack of personal jurisdiction, improper venue, and improper service of process;
Defendant American Board of Emergency Medicine's motion to dismiss the Second Amended Complaint on the ground of improper venue; and, Defendant Council of Emergency Medicine Residency Directors' motion to dismiss the Second Amended Complaint on grounds of lack of personal jurisdiction, improper venue, and improper service of process.
Plaintiff, an emergency medicine physician, filed this action on September 25, 1990, following the American Board of Emergency Medicine's ("ABEM") refusal to permit Plaintiff to take its examination as a prerequisite to certification as an ABEM Diplomate. Plaintiff filed an amended complaint ("the First Amended Complaint") on February 7, 1991, asserting causes of action under Sections 1 and 2 of the Sherman Act, 15 U.S.C. § 1 et seq., and seeking relief pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. § 12 et seq. On January 13, 1994, the Second Amended Complaint was filed, adding one hundred and seventy-five additional Plaintiffs, all individual physicians who allege to have similar claims, and thirty Defendants, including the Council of Emergency Medicine Residency Directors ("CORD") and twenty-eight teaching hospitals whom Plaintiffs allege are co-conspirators with Defendant ABEM. Specifically, in the Second Amended Complaint, Plaintiffs allege that ABEM conspired with CORD and the hospital Defendants to unreasonably restrict competition between ABEM certified and non-certified emergency physicians, including Plaintiffs, by eliminating ABEM's prior alternative qualification for eligibility to sit for ABEM's certification examination on the basis of years of practice in the field of emergency medicine (referred to as the "practice track"), under which Plaintiffs may have been eligible to sit for and successfully pass the examination thereby requiring ABEM's certification. Plaintiffs allege that ABEM and the hospital Defendants perpetuated this restraint through a conspiracy involving various professional organizations in the field of emergency medicine, including CORD, as a result of the activities of various physicians whom had achieved ABEM certification under the practice track and were either employed or affiliated with the hospital Defendants' residency programs in emergency medicine. Familiarity with the further proceedings and orders of this court, addressing the sufficiency of the First Amended Complaint, Daniel v. American Board of Emergency Medicine, 802 F. Supp. 912 (W.D.N.Y. 1992), and various issues related to Plaintiffs' discovery requests, is presumed.
Defendants subsequently, in March, April, and May of 1994, moved to dismiss or for summary judgment
for lack of personal jurisdiction, improper venue, on grounds of immunity, and for insufficient service of process.
Following five months of jurisdictional discovery,
Plaintiffs file, on December 12, 1994, a memorandum in opposition to Defendants' motions to dismiss or for summary judgment. Defendants subsequently filed both joint and individual memoranda in support of the motions. Oral argument was held on March 13, 1995.
Based upon the discussion which follows, Defendants Ohio State University Hospital, Oregon Health Sciences University Hospital, University of California (Los Angeles) Medical Center, University of California (Irvine) Medical Center, University of California (San Diego) Medical Center, University Hospital of the State University of New York at Stony Brook, University Hospital at the University of New Mexico School of Medicine, and University of Massachusetts Medical Center should be dismissed from this action on grounds of Eleventh Amendment immunity. Alternatively, Defendants Lincoln Medical and Mental Health Center, Ohio State University Hospital, Oregon Health Sciences University Hospital, University of California (Los Angeles) Medical Center, University of California (Irvine) Medical Center, University of California (San Diego) Medical Center, University Hospital of the State University of New York at Stony Brook, University Hospital at the University of New Mexico School of Medicine and University of Massachusetts Medical Center, should be dismissed from the suit as they are exempt from federal antitrust laws under the state action doctrine. The action against Lincoln Medical and Mental Health Center and Tri-City Medical Center should be dismissed insofar as money damages are requested under the Local Government Antitrust Act.
This court also finds that under Section 12 of the Clayton Act, 15 U.S.C. § 22, each of the Defendants which are domestic corporations should be subject to personal jurisdiction in this district, including CORD, Children's Hospital (San Diego), Children's Hospital of Michigan, Detroit Receiving Hospital and University Health Center, Forsyth Memorial Hospital, Johns Hopkins Hospital, Part of the Johns Hopkins Health System, Kettering Medical Center, Loma Linda University Medical Center, Lutheran General Hospital, Medical College of Pennsylvania and Hospital, Mercy Catholic Medical Center-Misericordia Division, Mercy Hospital and Medical Center, Methodist Hospital of Indiana, Oregon Health Sciences University Hospital,
Riverside Methodist Hospitals, Saint Francis Medical Center, St. Anthony Hospital, and University Medical Center (Tucson, Arizona). Thus, as to these Defendants, the motions to dismiss for lack of personal jurisdiction should be denied.
Alternatively, Johns Hopkins Hospital, Part of the Johns Hopkins Health System, should be subject to personal jurisdiction, pursuant to Section 301 of the New York Civil Practice Law and Rules ("N.Y. CPLR"), as the court finds it is doing or soliciting business in New York. However, the court finds that Plaintiffs have failed to demonstrate that CORD and the other hospital Defendants which have moved to dismiss for lack of personal jurisdiction are soliciting business pursuant to Section 301, or that they should be subject to personal jurisdiction, pursuant to New York's long-arm statute, N.Y. CPLR Section 302(a)(1), (2) or (3), for transacting business, or committing a tortious act within the state, or committing a tortious act outside the state causing injury within the state.
Therefore, even if, based on the District Judge's determination of the asserted immunity claims, if remaining as parties to this action, the motions to dismiss for lack of personal jurisdiction, made by Ohio State University Hospital, Tri-City Medical Center, University of California (Los Angeles) Medical Center, University of California (Irvine) Medical Center, University of California (San Diego) Medical Center, University Hospital at the University of New Mexico School of Medicine, and University of Massachusetts Medical Center, should be granted as the court finds personal jurisdiction under Section 12 of the Clayton Act and N.Y. CPLR Sections 301, 302, or 303, does not exist over these Defendants.
The court also finds that proper venue as to ABEM and Johns Hopkins Hospital, Part of the Johns Hopkins Health System exists pursuant to Section 12 of the Clayton Act, however, those Defendants which are not domestic corporations, if remaining as parties, are not subject to venue under this section. However, should the District Judge accept the Report and Recommendation regarding Eleventh Amendment immunity, the state action doctrine, the Local Government Antitrust Act, or lack of personal jurisdiction, Defendants Tri-City Medical Center, University of California (Los Angeles) Medical Center, University of California (Irvine) Medical Center, University of California (San Diego) Medical Center, University Hospital at the University of New Mexico School of Medicine, and the University of Massachusetts Medical Center will have been dismissed from the action as parties, leaving the remaining Defendants - Children's Hospital (San Diego), Children's Hospital of Michigan, CORD, Detroit Receiving Hospital and University Health Center, Forsyth Memorial Hospital, Johns Hopkins Hospital, Part of the Johns Hopkins Health System, Kettering Medical Center, Loma Linda University Medical Center, Lutheran General Hospital, Medical College of Pennsylvania and Hospital, Mercy Catholic Medical Center - Misericordia Division, Mercy Hospital and Medical Center, Methodist Hospital of Indiana, Riverside Methodist Hospitals, Saint Francis Medical Center, St. Anthony Hospital, and University Medical Center (Tucson) - as subject to venue in this district pursuant to 18 U.S.C. § 1391(b)(1). The motions to dismiss pursuant to 28 U.S.C. § 1406(a) should, nevertheless, be granted with respect to University of California (Los Angeles) Medical Center, University of California (Irvine) Medical Center and University of California (San Diego) Medical Center, but denied as to ABEM. CORD and Mercy Catholic Medical Center-Misericordia Division's motions to dismiss for improper service of process should be denied.
On a motion to dismiss, the court looks to the four corners of the complaint and is required to accept a plaintiff's allegations as true and to construe those allegations in the light most favorable to plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974); Dacey v. New York County Lawyers' Association, 423 F.2d 188, 191 (2d Cir. 1969), cert. denied, 398 U.S. 929, 26 L. Ed. 2d 92, 90 S. Ct. 1819 (1970). The complaint will be dismissed only if "it appears beyond doubt" that the plaintiffs can prove no set of facts which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985). The court is required to read the complaint with great generosity on a motion to dismiss. See Yoder v. Orthomolecular Nutrition Institute, 751 F.2d 555, 558 (2d Cir. 1985).
Defendants argue that Plaintiffs' Second Amended Complaint should be dismissed for lack of subject matter jurisdiction, lack of personal jurisdiction, improper venue, and improper service of process pursuant to Federal Rules of Civil Procedure 12(b)(1), (2), (3) and (5). These contentions will be discussed in this Report and Recommendation.
I. Subject Matter Jurisdiction
This court has authority to examine and resolve the issues surrounding any motions challenging the jurisdiction of the court. Thornhill Publishing v. General Telephone & Electronics, 594 F.2d 730, 733 (2d Cir. 1979). The party asserting jurisdiction bears the burden of proving that the case is in the proper forum. United Food & Commercial Workers Union, Local 919, AFL-CIO v. Centermark Properties Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994).
In evaluating a Rule 12(b)(1) motion to dismiss challenging the court's subject matter jurisdiction, the court may resolve disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits. Antares Aircraft, L.P. v. Federal Republic of Nigeria, 948 F.2d 90, 96 (2d Cir. 1991), cert. granted and judgment vacated on other grounds, 112 S. Ct. 3020 (1992); Sheahan v. Brady, 866 F. Supp. 770, 771 (S.D.N.Y. 1994). The court has broad authority and discretion in resolving jurisdictional issues, and can receive affidavits, interrogatories, depositions, oral testimony, or any combination in making such a determination. Washington v. Norton Manufacturing, Inc., 588 F.2d 441, 443 (5th Cir.), cert. denied, 442 U.S. 942, 61 L. Ed. 2d 313, 99 S. Ct. 2886 (1979). Based on the extensive discovery conducted relating to the jurisdictional issues presented on the motions and the voluminous and detailed affidavits and exhibits submitted in this case, no hearing was deemed necessary.
Defendants Ohio State University Hospital, Oregon Health Sciences University Hospital, University of California (Los Angeles) Medical Center, University of California (Irvine) Medical Center, University of California (San Diego) Medical Center, University Hospital of the State University of New York at Stony Brook, University Hospital at the University of New Mexico School of Medicine, and the University of Massachusetts Medical Center, assert that, as hospitals connected with their respective state university medical schools, they qualify for Eleventh Amendment immunity, and that this court therefore lacks subject matter jurisdiction over them. Defendants Oregon Health Sciences University Hospital, Tri-City Medical Center, University of California (Los Angles) Medical Center, University of California (Irvine) Medical Center, University of California (San Diego) Medical Center, University Hospital of the State University of New York at Stony Brook, University Hospital at the University of New Mexico School of Medicine, and University of Massachusetts Medical Center also assert that the state action doctrine prohibits this court from enforcing federal antitrust laws against these Defendants. Further, Defendants Lincoln Medical & Mental Health Center, Oregon Health Sciences University Hospital, Tri-City Medical Center, University of California (Los Angles) Medical Center, University of California (Irvine) Medical Center, University of California (San Diego) Medical Center, University Hospital at the University of New Mexico School of Medicine, and University of Massachusetts Medical Center argue that they are immune from suit pursuant to the Local Government Antitrust Act of 1984, 15 U.S.C. §§ 34-36. Lincoln Medical & Mental Health Center and Tri-City Medical Center are units of municipal health care facilities located, respectively, in New York City and San Diego.
a. Eleventh Amendment Immunity
The Eleventh Amendment commands that "the Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. Its immunity extends to entities created by state governments that operate as instrumentalities of the state.
Hess v. Port Authority Trans-Hudson Corporation, 513 U.S. 30, 115 S. Ct. 394, 396, 130 L. Ed. 2d 245 (1994); Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 401, 59 L. Ed. 2d 401, 99 S. Ct. 1171 (1979). In determining whether a governmental body may invoke the Amendment's immunity from suit in federal court, the court will assess whether the entity constitutes an arm of a state by evaluating the degree of control and supervision over the entity, including the state's power of appointment and removal of officers or directors, any authority to approve or disapprove the actions of the entity, including its capacity to raise revenue for its own purposes, whether the entity is financially independent from the state, whether the state is responsible for the entity's obligations and liabilities, and the character of its functions, i.e., state-wide or local,
are performed or served by the entity.
Lake Country Estates, Inc. v. Tahoe Regional Planning, 440 U.S. 391, 400-402, 59 L. Ed. 2d 401, 99 S. Ct. 1171 (1979); Baxter v. Vigo Cty. School Corp., 26 F.3d 728, 732-33 (7th Cir. 1994); Feeney v. Port Authority Trans-Hudson Corporation, 873 F.2d 628, 629-30 (2d Cir. 1989), aff'd, 495 U.S. 299, 109 L. Ed. 2d 264, 110 S. Ct. 1868 (1990). Each factor must be evaluated to determine whether a state is actually or effectively being sued in the proceeding. Ford Motor Company v. Department of Treasury, 323 U.S. 459, 464, 89 L. Ed. 389, 65 S. Ct. 347 (1945). If, based on this analysis, the state is found not to be the real party in interest, the protections afforded pursuant to the Eleventh Amendment are unavailable to the defendant. Ford Motor Company, supra, at 464.
Courts have also examined the legal powers of the entity, including its capacity to sue or be sued independently from the state, enter into contracts in its own name, acquire property, enjoy immunity from state taxation, or having a distinct corporate status. See, e.g., Fitzpatrick v. Bitzer, 519 F.2d 559, 564-65 (2d Cir. 1975), rev'd on other grounds, 427 U.S. 445, 49 L. Ed. 2d 614, 96 S. Ct. 2666 (1976). However, neither the Supreme Court nor the Second Circuit have discussed these latter factors in any recent case employing an arm-of-the-state inquiry. See Hess, supra; Lake Country Estates, supra; Mount Healthy City School District, supra; Feeney v. Port Authority Trans-Hudson Corporation, 873 F.2d 628 (2d Cir. 1989), aff'd, 495 U.S. 299, 109 L. Ed. 2d 264, 110 S. Ct. 1868 (1990). "When [these] indicators of immunity point in different directions, the Eleventh Amendment's twin reasons for being remain the prime guide," Hess, supra, at 404, namely preventing threats to the state's dignity by requiring the entity to defend suit in federal court and avoidance of federal court judgments which must be paid out of a state's treasury.
Hess, supra, at 404.
Here, eight of the moving hospital Defendants are sponsored by state-created public universities.
The overwhelming majority of courts which considered the question of Eleventh Amendment immunity as to such institutions, found state universities share in their respective state's Eleventh Amendment immunity. See Sherman v. Curators of University of Missouri, 16 F.3d 860, 863 n.3 (8th Cir. 1994) (citing cases). However, as no one factor is dispositive in determining whether an entity is entitled to Eleventh Amendment immunity, and as each state university "exists in a unique governmental context . . . each must be considered on the basis of its own peculiar circumstances." Hall v. Medical College of Ohio at Toledo, 742 F.2d 299, 302 (6th Cir. 1984), cert. denied, 469 U.S. 1113 (1985) (quoting Soni v. Board of Trustees, 513 F.2d 347, 352 (6th Cir. 1975), cert. denied, 426 U.S. 919, 49 L. Ed. 2d 372, 96 S. Ct. 2623 (1976)). See also Kashani v. Purdue University, 813 F.2d 843, 845 (7th Cir.), cert. denied, 484 U.S. 846, 98 L. Ed. 2d 97, 108 S. Ct. 141 (1987) ("Although state universities have consistently been found to be entitled to immunity, courts reexamine the issue with regard to the facts of each case 'because the states have adopted different schemes . . . in constituting their institutions of higher learning.'" (quoting United Carolina Bank v. Board of Regents, 665 F.2d 553, 557 (5th Cir. 1982)).
In this case, Plaintiffs contend that Defendants asserting Eleventh Amendment immunity are not entitled to it as they are "independently operated and financially self-sufficient businesses engaged in commercial activities, not governmental organizations involved in legislative or regulatory functions." Plaintiffs' Memorandum of Law in Opposition to Jurisdictional and Immunity Motions, filed December 12, 1994, at p. VI-2 ("Plaintiffs' Memorandum of Law") (emphasis in original). Therefore, Plaintiffs contend, that the court should not allow these Defendants to evade responsibility in federal court for their conduct under the guise of Eleventh Amendment immunity. Further, Plaintiffs argue that if Defendants are granted immunity, they will be deprived of any remedy for the alleged antitrust violations.
See Plaintiffs' Memorandum of Law at p. VI-2.
As an initial matter, Plaintiffs' argument, Plaintiffs' Memorandum of Law at VI-2, VI-17 - VI-38, that the Eleventh Amendment should not be applicable to the hospital Defendants as they operate as independent businesses is beside the point.
Many state agencies provide services that may also be readily available from, and perhaps even more efficiently provided by, commercial private enterprises whether or not operated for profit. However, the Eleventh Amendment's protection does not turn on whether the activity in question is one that predominantly is associated with goods or services traditionally produced or purveyed in the private sector such as health care, but rather whether the entity providing such service is the state. Thus, the issue must, as stated in Hess, supra, at 404, and Feeney, 873 F.2d at 629-30, ultimately depend on whether the sovereign power of the state is so involved in the organization and operation of the entity as to directly implicate the fundamental policy of federalism secured by the Eleventh Amendment. The fact that the state chooses to involve itself in a service readily available from private enterprises which do not, normally, enjoy immunity from prosecution of antitrust claims in federal court does not displace this basic constitutional principle.
Any remedy to perceived unfairness to injured litigants is not to be found in bending the Eleventh Amendment beyond its contours to accommodate such arguably valid concerns, but with the legislatures which make important choices on behalf of the states they govern, including an election to waive the Amendment's protection. See Hess, supra, at 305 (a state does not waive its Eleventh Amendment immunity by consenting to suit only in its own state courts, the state must specify its intention to subject itself to suit in federal court). Adopting Plaintiffs' argument would, except in cases involving the state itself, effectively repeal the Eleventh Amendment's broad protection afforded the states as many activities and services organized or provided under state law are analytically well within Plaintiffs' concept of "financially self-sustaining" business entities.
Another premise underlying the Plaintiffs' position that the public hospital Defendants are outside the Eleventh Amendment's protection is that, as the majority of their respective revenues derive from patient fees and are held in accounts separate from the general treasury accounts of the sponsoring state itself, a money judgment in this action would not be one against the state and thus would not contravene the second of the "twin reasons," Hess, supra, at 404, for the Amendment, "the prevention of federal court judgments that must be paid out of a state's treasury." Id. This premise is dependent on characterizing the operating accounts of these hospital Defendants not being a part of their respective state treasuries, and is invalid for several reasons.
Initially, see Discussion Section I(a), infra, each such hospital Defendant is a public entity created either by state statute or constitution as an agency, arm or instrumentality of the state. Although only Ohio has specifically so stated by legislation, Ohio Rev. Code Ann. §§ 117.01 and 3345.05 (Baldwin 1995), the record supports a finding that these funds as generated by the hospitals are public monies. The court's attention has been directed to no case supporting a finding that the term "state treasury" for Eleventh Amendment purposes is limited only to funds held in accounts controlled by a state officer, such as a comptroller or treasurer, and this court has found none. Indeed, as discussed, see Discussion Section I(a), infra, the hospital Defendants claiming Eleventh Amendment immunity are subject to financial audits by other state officials. Such general auditing power strongly suggests a degree of interest in these funds equivalent to that as may be expected with respect to the state's accounts for more common types of revenue sources such as income and sales taxes. See, e.g., Rothstein v. Wyman, 467 F.2d 226, 236-37 (2d Cir. 1972), cert. denied, 411 U.S. 921, 36 L. Ed. 2d 315, 93 S. Ct. 1552 (1973) ("reparations" for delayed payment of federal public assistance benefits involved "substantial expenditures from public funds of the state" thereby requiring Eleventh Amendment protections) (McGowan, J.) (emphasis added). Nor does the fact that the source of monies held by the public hospital Defendants are patient fees rather than general tax revenues alter this result. "When the action is in essence one for recovery of money from the state," the Eleventh Amendment applies. See Ford Motor Car Co. v. Department of Treasury of Indiana, 323 U.S. 459, 464, 89 L. Ed. 389, 65 S. Ct. 347 (1944) (action in federal court for refund, by state officers constituting board of Indiana Department of Treasury, of illegally collected sales taxes precluded by Eleventh Amendment) (emphasis added); Jain v. University of Tennessee, 670 F. Supp. 1388 (W.D. Tenn. 1988), aff'd, 843 F.2d 1391 (6th Cir.), cert. denied, 488 U.S. 827, 102 L. Ed. 2d 54, 109 S. Ct. 78 (1988)) (fact that two-thirds of state university funding derived from non-legislated sources did not preclude Eleventh Amendment immunity).
Further, the question of whether state public funds would respond to a federal judgment depends on a careful examination of the entity's relationship to the state and, in particular, whether the entity has the power to raise its own funds. See Hess, supra; Baxter, supra, at 732-33 (county department of welfare, as part of county having taxing power independent of state, not protected by Eleventh Amendment). Here, although each public hospital Defendant has authority to set patient fees, such power clearly is not exercised independently of state approval and oversight. See N.Y. Educ. L. § 355(8) (McKinney 1999) (State University of New York funds subject to regulation by the state comptroller); Plaintiffs' Memorandum of Law at VI-26, VI-28 - VI-29, VI-30 - VI-31, VI-33 - VI-34; Appendix Volume 5, Exhibit 6, Doc. Nos. LL11 1063, LL11 1092; Appendix Volume 6, Exhibit 1, Doc. Nos. LL12 1415-LL12 111451; Exhibit 2, Doc. Nos. LL13 432-LL13 433, LL13 453-LL13 459; Appendix Volume 14, Exhibits 1-3, 5-9, Interrogatory Response Nos. 2, 5, 14; Ohio State University Hospital's Memorandum of Law in Support of Motion to Dismiss, filed May 2, 1994, Exhibit B, § 3335-93-02. Moreover, in no case has the state which created the respective hospital Defendants, divorced itself from all financial responsibility for any liabilities incurred. Compare Lake Country Estates v. Tahoe Planning Agency, 440 U.S. 391, 410, 59 L. Ed. 2d 401, 99 S. Ct. 1171 (1979) (noting that bi-state agency's enabling legislation expressly provided that neither creating state would be liable for agency's obligations - agency held not within Eleventh Amendment). As discussed, infra, neither is any public hospital Defendant authorized to pay any judgment from funds it may lawfully retain in accounts held separate from the state treasury. Therefore, because it cannot be found as to any public hospital Defendant that a judgment for money damages in this case will not be paid "both legally and practically" by the state, Hess, supra, at 406, the Eleventh Amendment's "core concern is implicated." Id. However, as required by Hess, the specific factors relating to each public hospital Defendant's organization and relationship to the respective states must nevertheless be analyzed.
1. Ohio State University Hospital
To determine whether Eleventh Amendment immunity applies to Ohio State University Hospital, Ohio statutory law, the bylaws of Ohio State University, and the bylaws of the Medical Staff of the Ohio State University Hospitals which includes Defendant University Hospital must be reviewed. University Hospital has requested that the court take judicial notice of its bylaws. Exhibit B of Ohio State University Hospital's Memorandum of Law in Support of Motion to Dismiss, filed May 2, 1994. As the bylaws describe the powers and duties granted to University Hospital's board of trustees and medical staff, their consideration is necessary to determine whether the hospital is an independent entity with respect to its degree of legal autonomy from the Ohio State University of which it is a unit and any other state governing bodies. Plaintiffs do not oppose this request. The court therefore takes judicial notice of the bylaws, as presented in Exhibit B. See Fed.R.Evid. 201(d) (court may take judicial notice as requested by a party).
When an action is brought against an entity or institution claiming immunity under the Eleventh Amendment, application of the amendment turns on whether the entity can be characterized as an arm of the state, or whether it should be treated as a nonimmunized political subdivision of the state. Mount Healthy City School District, supra, at 280 ("The bar of the Eleventh Amendment to suit in federal courts extends to States and state officials in appropriate circumstances, but does not extend to counties and similar municipal corporations") (citations omitted). In determining whether the University Hospital is entitled to immunity, this court will examine the relationship among Ohio State University, its board of trustees, and the state of Ohio, as well as several factors relating to the autonomy, financial independence, and function of the University Hospital.
The Ohio State University was created as a state educational institution for higher education by the Ohio General Assembly; a board of trustees was simultaneously created to govern the university. Ohio Rev. Code Ann. §§ 3335.01, 3335.02, 3345.011 (Baldwin 1995).
The Ohio State University Board of Trustees ("the OSU Trustees") consists of eleven members. Ohio Rev. Code Ann. § 3335.02(A). The OSU Trustees are appointed by the governor of Ohio and confirmed by the state senate
for nine year terms.
Ohio Rev. Code Ann. § 3335.02(A). Cf. United Carolina Bank, supra, at 558 (where an institution's governing body is elected by local voters rather than being appointed by the governor with the advice and consent of the state senate, it is more likely a political subdivision than an arm of the state). Through its plenary appointment authority, the state of Ohio exercises significant influence over the operations of the OSU Trustees and, through the Trustees, Ohio State University.
The Ohio legislature has granted the OSU Trustees the ability to sue and be sued,
the authority to contract, and the power to make and use a common university seal, to enable the board of trustees to effectively operate the university. Ohio Rev. Code Ann. § 3335.03. These powers are, however, specifically defined and limited by the state legislature. For example, Ohio statutes prescribe the number of trustees necessary for a quorum, Ohio Rev. Code Ann. § 3335.06, the duration of fire protection contracts, Ohio Rev. Code Ann. § 3345.09, and even the penalty for the unauthorized duplication of keys, Ohio Rev. Code Ann. §§ 3345.13, 3345.99.
"The trustees are also given the power to adopt rules and regulations, Ohio Rev. Code Ann. § 3335.08, but it is not suggested that the state could not statutorily modify or invalidate such rules." Bailey v. Ohio State University, 487 F. Supp. 601, 604 (S.D.Oh. 1980). "This structure demonstrates that, as to general powers, Ohio State [University] is much less autonomous in its relation to the state than other universities which have been held not to be instrumentalities of the state." Bailey, supra, at 604.
University Hospital was created by the OSU Trustees on September 13, 1963 as part of a program to establish a college of medicine. Ohio Rev. Code Ann. § 3335.15; Ohio State University Hospital's Memorandum in Support of Motion to Dismiss, filed May 2, 1994, Exhibit B, Bylaws of Medical Staff of Ohio State University Hospitals, § 3335-43-01 (1993) ("Hospital Bylaws"). The hospital is governed by a board ("Hospital Board"), selected by the OSU Trustees. Hospital Bylaws § 3335-93-01(A)(1). The Hospital Board consists of fourteen members, including two members of the OSU Trustees and twelve citizen members who are appointed by the OSU Trustees in consultation with the president of Ohio State University. Hospital Bylaws § 3335-93-01. The citizen members of the Hospital Board can be removed or suspended by the OSU Trustees, thus circumscribing the independence of the Hospital Board. Hospital Bylaws § 3335-93-07(A).
The Hospital Board is responsible for oversight of patient care services and the University Hospital's support of the Ohio State University health sciences academic programs. Hospital Bylaws §§ 3335-93-01(A), 3335-99-01. The powers of the Hospital Board are specifically enumerated in the Hospital Bylaws, Sections 3335-93-01 through 3335-93-10. The OSU Trustees did not grant the Hospital Board the power to sue or be sued or to acquire or own property in the hospital's name. Ohio Rev. Code § 3335.15(B). However, the hospital is empowered to enter into contracts without prior approval of the state, although these contracts are of a limited nature and all must ultimately be approved by other university officials.
Plaintiffs' Memorandum of Law at VI-34; Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 19, pp. 79-82.
It appears that the delegation of some of the OSU Trustees' powers to the Hospital Board was necessary for the College of Medicine and University Hospital to properly function. However, despite the myriad responsibilities of the Hospital Board, it remains ultimately subject to the authority of the OSU Trustees. Hospital Bylaws §§ 3335-93-02, 3335-93-03. Significantly, the powers expressly enumerated in the Hospital Bylaws can be amended or withdrawn at any time by the OSU Trustees. Hospital Bylaws § 3335-103-01.
Ohio State University has not granted the University Hospital separate corporate existence; further, the Ohio State University was not created as a corporation with perpetual existence. See Bailey, supra, at 604. Moreover, the hospital itself has no employees, as all members of its medical staff are faculty members of the Ohio State University College of Medicine, an academic unit of the Ohio State University. Hospital Bylaws § 3335-43-04(A)(2).
Title to all land used by the Ohio State University and the University Hospital is held in the name of the state of Ohio. Ohio Rev. Code Ann. § 3335.13; 1995 Oh. Laws § 3345.12(P). Only property held for investment purposes or in the university's endowment portfolio is held in trust by the OSU Trustees for Ohio State University. Ohio Rev. Code Ann. § 3335.13. Further, the OSU Trustees must "negotiate for and receive conveyances and transfers of property, both real and personal, to be used by [the college of medicine]." Ohio Rev. Code Ann. § 3335.15(B).
Additionally, Ohio Rev. Code Ann. § 2743.01(A) provides that an Ohio state university, such as the Ohio State University, Ohio Rev. Code Ann. § 3345.011, is an instrumentality of the state, and is amenable to suit in the state's court of claims.
Ohio Rev. Code Ann. § 3335.03(B).
The various powers delegated to the OSU Trustees and the Hospital Board indicate a degree of independence from the state of Ohio itself, however, that appearance is diluted by the fact that the entire OSU Board of Trustees, which, as noted, chooses the members of the Hospital Board, is selected by the governor of Ohio with the advice and consent of the Ohio senate. Moreover, the OSU Trustees expressly retained the power to amend or repeal the duties and powers of the Hospital Board, and the Trustees must make annual reports regarding the Ohio State University and the University Hospital to the Ohio General Assembly. Ohio Rev. Code Ann. § 3335.07. From that perspective, the functions granted to both the Hospital Board and the OSU Trustees appear less like the independent powers of a municipality, such as a city or county, and more like the scope of authority legislatively delegated to an agency or other instrumentality of the state thereby sparing the state's legislature of the obligation to ratify its every action.
The court must next determine whether relevant caselaw treats the entity at issue as independent or as a surrogate of the state. Feeney, supra, at 629-30. Several Ohio cases have addressed the question of whether Eleventh Amendment immunity applies to the state colleges and universities of Ohio and have clearly held Ohio's state colleges and universities, including the Ohio State University, to be arms of the state entitled to the amendment's protection. See Weaver v. University of Cincinnati, 758 F. Supp. 446 (S.D.Oh. 1991) (Eleventh Amendment barred suit against the University of Cincinnati as it is an arm of the state); Dillion v. University Hospital, 715 F. Supp. 1384, 1386-87 (S.D.Oh. 1989) (university hospital is an agent of the University of Cincinnati and therefore an arm of the state of Ohio entitled to Eleventh Amendment immunity); Bailey, supra, at 604 (Ohio State University is an instrumentality of the state entitled to Eleventh Amendment immunity); Thacker v. Board of Trustees, 31 Ohio App. 2d 17, 285 N.E.2d 380 (Ohio App. 1971), aff'd, 35 Ohio St. 2d 49, 298 N.E.2d 542 (Ohio 1973) (Ohio State University and Ohio State University Hospitals are instrumentalities of the state), overruled in part on other grounds, Schenkolewski v. Cleveland Metroparks System, 67 Ohio St. 2d 31, 426 N.E.2d 784, 787 n. 3 & 4 (Ohio 1981); Wolf v. Ohio State University Hospital, 170 Ohio St. 49, 162 N.E.2d 475 (Ohio 1959) (Ohio State University Hospital and the Board of Trustees of Ohio State University are instrumentalities of the state), overruled in part on other grounds, Schenkolewski, supra, at 787 n. 3 & 4. See also Hall, supra, at 303 (Ohio considers its colleges and universities to be part of the state for purposes of sovereign immunity).
As the degree of control over the University Hospital by the OSU Trustees and, through the OSU Trustees, the governor of Ohio is fairly substantial, and the Ohio courts, both federal and state, have determined Ohio State University and the Defendant University Hospital to be instrumentalities of the state, the court finds that the autonomy factor weighs in favor of according Eleventh Amendment immunity to the University Hospital.
Plaintiffs vigorously argue, as discussed, supra, that any judgment which might be obtained in this action would not necessarily be paid from the state treasury, but could be satisfied from the University Hospital's self-generated revenue, its trust fund, or commercial insurance carried by it. Plaintiffs' Memorandum of Law at VI-31 - VI-32. The University Hospital maintains an insurance trust fund to meet its liabilities for malpractice claims, which was established and funded pursuant to the authority of Ohio Revised Code Section 3345.201. Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 19, pp. 93, 97, 101. The hospital also maintains private insurance coverage in case the insurance trust fund is expended. Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 19, pp. 101-102. The Executive Director of the University Hospital stated that this insurance policy was intended for general liability claims. Id.
Plaintiffs contend, in an attempt to demonstrate that Eleventh Amendment immunity does not apply, that a judgment against the University Hospital could be paid from its insurance policies. However, Plaintiff cites no authority to support its argument that the presence of insurance displaces immunity afforded by the Eleventh Amendment. To the contrary, several courts which have considered the effect of insurance on the question of waiver of immunity hold that the presence of insurance does not defeat a claim of Eleventh Amendment immunity. See, e.g., Bockes v. Fields, 999 F.2d 788, 790-791 (4th Cir. 1993) (where Commonwealth of Virginia's Public Officials Liability Self-Insurance Plan would be required to pay a judgment against the defendants, and the Commonwealth funds eighty percent of the self-insurance plan, the Eleventh Amendment nevertheless bars recovery); Wallace v. State of Oklahoma, 721 F.2d 301, 305 (10th Cir. 1983) (Oklahoma statute which waived sovereign immunity for a claim covered by liability insurance did not waive Eleventh Amendment immunity in federal court); Gressley v. Deutsch, 890 F. Supp. 1474, 1488 (D.Wy. 1994) (even if the University of Wyoming had insurance policy to cover the civil rights claims asserted by the plaintiff, such policies would not result in waiver of Eleventh Amendment immunity); Mohammed v. Farney, 832 F. Supp. 103, 106 (S.D.N.Y. 1993) (the state did not waive its Eleventh Amendment immunity by purchasing liability insurance); Hobbs v. Georgia Department of Transportation, 785 F. Supp. 980, 984 (N.D.Ga. 1991) (mere creation of an insurance fund to protect state treasury does not act as an implicit waiver of a state's Eleventh Amendment immunity); Ragosta v. State of Vermont, 556 F. Supp. 220, 224 (D.Vt. 1981) (insurance policy purchased by state did not amount to a waiver of immunity under the Eleventh Amendment). Based upon this authority, even assuming that the University Hospital has insurance coverage for the antitrust claims asserted by Plaintiffs, this fact does not bar application of Eleventh Amendment immunity.
University Hospital maintains that its trust fund money consists of public funds as defined by Ohio law, Ohio Rev. Code Ann. § 117.01, and, therefore, any judgment against the hospital constitutes a judgment against the state. Ohio law also provides that any money received, collected by, or owed to a representative, officer, or employee of a state agency,
public institution, political subdivision, or other office pursuant to any order, resolution, or authority constitutes public money. Ohio Rev. Code Ann. § 117.01. The hospital continues the analysis to conclude that any damage award imposed by a federal court and paid from the hospital's operating funds or funds allocated by the state, constitute Ohio public funds and would violate the Eleventh Amendment. Ohio State University Hospital's Memorandum of Law at pp. 14-15. Thus, it concludes, a federal money judgment in this action against the University Hospital could result in the depletion of Ohio's public funds.
In determining whether a state university is entitled to Eleventh Amendment immunity, courts also consider the extent of state funding, the state's oversight and control of the university's fiscal affairs, the university's ability to independently raise funds, whether the state taxes the university, and whether a judgment against the university would result in the state increasing its appropriations to the university. Kashani, supra, at 845.
Ohio State University's College of Medicine only qualifies for state funding if it meets the legal requirements for state funding, including operating an accredited program of medical education in the state, and maintaining a department of family practice, including courses of study, clinical experience, preceptorships, and residencies in family practice. Ohio Rev. Code Ann. §§ 3333.10, 3333.11, 3335.15(A). The OSU Trustees are required to prepare and file a detailed statement regarding the condition of the university, all expenditures and disbursements made, the number of professors, staff, and students in each department, an estimate of expenses for the following year, a statement demonstrating progress of the university, and other such information. Ohio Rev. Code Ann. § 3335.07. A necessary component of this budget is the operating budget for the University Hospital. Defendant's Reply Memorandum of Law, filed May 2, 1994, at p. 40. These statements are then submitted to the Ohio legislature for approval. See Harden, supra, at 1163 ("Where the budget of an entity is submitted to the state for approval, this suggests that the entity is an agency of the state [for the purpose of determining the degree of state control over the entity and the fiscal autonomy of the entity]"). Further, all aspects of the economic life of Ohio State University and, therefore, the operation of University Hospital, are subject to state audit and other forms of scrutiny. Ohio Rev. Code Ann. § 3345(B) (trustees' annual report shall include "amounts of receipts and disbursements"); Ohio Rev. Code Ann. § 3345.03 (university must pay cost of inspection of accounts by state bureau of inspection and supervision of public offices); Ohio Rev. Code Ann. § 3345.05 ("all receipts and expenditures are subject to the inspection of the auditor of the state").
By contrast with the state's community colleges, school districts, and other political subdivisions of Ohio such as its counties, towns and villages, the Ohio State University and the University Hospital do not have the power to levy taxes to service a bond issue. Cf. Mount Healthy, supra, at 280. The absence of the authority to tax is a strong indication that an entity is more like a direct arm of the state government than a county or a city, as such enablement gives the entity an important degree of fiscal and operational autonomy. Kashani, supra, at 846. Compare Mackey v. Stanton, 586 F.2d 1126, 1131 (7th Cir. 1978), cert. denied, 444 U.S. 882, 62 L. Ed. 2d 112, 100 S. Ct. 172 (1979) (the county department and the school board have the power to raise their own funds by tax levy and by bond issuance, providing a manner for payment of judgments without resort to the state treasury); United Carolina Bank, supra, at 558 ("Most telling is the power of junior colleges to levy ad valorem taxes [as] . . . under Texas law, political subdivisions are sometimes defined as entities authorized to levy taxes."); Hall, supra, at 304 ("None of the [Ohio] state universities or colleges . . . have power to levy taxes to service such bond issues or otherwise provide revenue independent of state appropriations."). Thus, although the University Hospital has, as described below, sources of revenue, which under Ohio law are classified as public funds, other than appropriations from the legislature, it lacks the capacity typically granted local governments to require payments in the form of taxation or fees to fund the services they provide to the public.
The University Hospital receives the majority of its revenue from payment for services provided to patients, however, funds for the hospital may also be raised through the issuance of bonds by the OSU Trustees, but the limited ability to issue bonds and other obligations is regulated in detail by state law. 1995 Oh. Laws § 3345.12 (provides in-depth explanations of how obligations are authorized, prepared and secured). The debt obligations authorized by the OSU Trustees are secured by a pledge of and lien upon the available receipts of Ohio State University, as provided for in the bond proceedings, excluding money raised by taxation and state appropriations. 1995 Oh. Laws §§ 3345.12(B), (C). Significantly, payment of a judgment is not one of the purposes for which the Ohio State University is authorized to issue bonds. 1995 Oh. Laws §§ 3345.12(B), (C). Further, the OSU Trustees and the Hospital Board are prohibited from contracting "a debt not previously authorized by the general assembly [the Ohio legislature]." Ohio Rev. Code Ann. § 3335.10.
Plaintiffs emphasize the fact that the University Hospital can avail itself of self-generated income from its own hospital charges for services it may provide and donations, and that any judgment rendered against the hospital could be paid by funds not appropriated from the Ohio General Assembly. However, "by statute, the Ohio legislature permits the state colleges and universities to retain [self-generated] funds, rather than require them to be paid into the treasury and then appropriated back to the schools as needed, but it could just as easily amend that statute to require the converse." Hall, supra, at 304.
Plaintiffs' argue that the most relevant financial factor weighing against finding Eleventh Amendment immunity for the University Hospital is that the hospital's operating funds do not come predominantly from the state. For example, for the hospital's 1992 - 1993 fiscal year, only 2.8% of the hospital's total revenues were attributable to direct state appropriations.
Plaintiffs' Memorandum of Law at VI-31 - VI-32. However, no statutory limitation exists restricting the amount of money that the University Hospital may receive from the state. See Ohio Rev. Code § 3335. Moreover, in assessing the Eleventh Amendment claim, "'the nature of the state's [legal] obligation to contribute may be more important than the size of the contribution.'" Fitchik v. New Jersey Transit Rail Operations, Inc., 873 F.2d 655, 660 (3d Cir. 1989) (quoting Blake v. Kline, 612 F.2d 718, 723 (3d Cir. 1979), cert. denied, 447 U.S. 921, 65 L. Ed. 2d 1112, 100 S. Ct. 3011 (1980)) (emphasis added). Thus, although the University Hospital has received, currently, a relatively small percentage of its total operating budget from state appropriations, in the future the hospital may require or receive larger appropriations to address its needs. Therefore, the extent of direct state financial support at a given point in time is not determinative of the hospital's financial independence for purposes of Eleventh Amendment immunity analysis.
Here, the key question for Eleventh Amendment purposes is whether the funds which would used to satisfy the potential federal court judgment will come directly from the state treasury, or whether, if the hospital's financial resources are insufficient or non-existent, the state must, under state law, reimburse the hospital, thereby effectively paying the obligation. Fitchik, supra, at 660. Although it appears that a judgment in this case would in all likelihood be paid from the hospital's trust fund, which constitutes public money, or the university's excess liability insurance policy, the judgment would be paid using public money, as Ohio has not specifically stated that it will not be liable for the debts and obligations incurred by the university. Ohio Rev. Code § 3335. Thus, the funding consideration favors University Hospital's claim that it is entitled to immunity from suit in federal court.
The primary purpose of the university hospital is the advancement of higher education by providing research and training support as part of the Ohio State University College of Medicine. Ohio Rev. Code Ann. § 3335.15. Federal courts have long provided that university and professional education is recognized as a function of state government. See Skehan v. State System of Higher Education, 815 F.2d 244, 248 (3d Cir. 1987). See also Stewart v. Baldwin County Board of Education, 908 F.2d 1499, 1511 (11th Cir. 1990) (public primary and secondary schools, unlike state colleges and universities, limit enrollment to city or county residents, thereby suggesting a "local" or municipal function); Miller v. Rutgers, 619 F. Supp. 1386, 1391 (D.N.J. 1985); Handsome v. Rutgers, 445 F. Supp. 1362, 1367 n. 7 (D.N.J. 1978).
In Mount Healthy School District v. Doyle, the Supreme Court looked not only to whether the entity at issue was formed with independent powers from the state but also to whether it served the state as a whole, or a particular region. Mount Healthy School District, 429 U.S. at 280 ("Petitioner is but one of many local school boards within the State of Ohio"). In this case, University Hospital provides educational and health care services for individuals state-wide, although patients located in the vicinity of the hospital's facilities at Columbus, Ohio are more likely to use the hospital on a regular basis than those persons who live at a greater distance. Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 19, pp. 85-86.
Moreover, the powers and duties granted to the Hospital Board to enable the Ohio State University Hospital to carry out its primary purpose of providing medical education together with the Ohio State University Medical School, contrasts to those of a city or county whose exercise of their far more extensive police powers, are their very reason for existence. Therefore, the University Hospital is distinguishable from public entities which perform only local government functions, and this factor weighs in favor of granting the hospital sovereign immunity. Compare Hess, supra, at 402 (Port Authority Trans-Hudson Corporation denied Eleventh Amendment immunity); Baxter, supra, at 732-33 (Eleventh Amendment did not bar claim against county department of public welfare) (citing Mackey v. Stanton, 586 F.2d 1126, 1131 (7th Cir. 1978), cert. denied, 444 U.S. 882, 62 L. Ed. 2d 112, 100 S. Ct. 172 (1979)).
As the autonomy, financial independence, and function indicators point toward a finding of immunity, this court need not assess whether a judgment in this case against the hospital would potentially deplete the Ohio state treasury, and whether the sovereign dignity of the state is preserved, as discussed in Hess, supra, 115 S. Ct. at 406 (1994).
Accordingly, applying the factors bearing on the availability of Eleventh Amendment immunity, the court finds that the Defendant University Hospital is an arm of the state of Ohio entitled to Eleventh Amendment immunity from suit in this court.
2. Oregon Health Sciences University Hospital
Oregon Health Sciences University and its University Hospital
were created as educational institutions for higher learning by the Oregon legislature. The Oregon Health Sciences University consists of a medical school, a dental school, a school of nursing, a hospital, and research centers. Or. Rev. Stat. § 352.055(1) (1993); Plaintiffs' Memorandum of Law, Appendix Volume 11, Exhibit 47, p. 8. The university was originally part of the Oregon State System of Higher Education, Or. Rev. Stat. § 352.002 (1993), however, in 1995, the Oregon legislature transformed Oregon Health Sciences University into a "public corporation." 1995 Or. Laws ch. 162 §§ 1(2), 1(3).
Under Oregon law, a public corporation is an entity "created by the state to carry out public missions and services . . . [by] participating in activities or providing services that are also provided by private enterprise."
1995 Or. Laws ch. 162 § 1(2).
The Board of Directors ("the Board") which governs the university consists of seven members
appointed by the governor of Oregon and confirmed by the state senate.
1995 Or. Laws ch. 162 §§ 1(2), 4(1). The terms of office are four years for nonstudent members, and two years for student members. 1995 Or. Laws ch. 162 § 4(2). The governor may remove any member of the Board at any time for cause, after notice and public hearing. 1995 Or. Laws ch. 162 § 4(7). Thus, the state of Oregon exercises superincumbent authority over the Board, Oregon Health Sciences University, and the University Hospital.
The Oregon legislature granted the Board the power to appoint and employ personnel, make and enter contracts, purchase, control, or dispose of title to real and personal property,
sue or be sued in its own name in any forum,
hold and control all funds, and borrow funds as needed by the university.
1995 Or. Laws ch. 162 § 8. Further, Oregon statutes pertaining to eminent domain procedures, intergovernmental cooperation, public records policy, and governmental standards and practices for officers and employees, Or.Rev.Stat. chs. 35, 190, 192, 244, apply to Oregon Health Sciences University upon the same terms which apply to public bodies other than the state. 1995 Or. Laws ch. 162 § 9. However, the provisions of several other Oregon statutes, including those dealing with state administrative agencies, procedures and rules of state agencies, personnel relations law, and state real property, Or. Rev. Stat. chs. 182, 183, 240, 270, do not apply to the university. 1995 Or. Laws ch. 162 § 9(2).
Oregon Health Sciences University may also issue and sell revenue bonds, however, the statute providing the procedure for a municipality to issue such bonds does not apply to revenue bonds issued by the University. 1995 Or. Laws ch. 162 § 59; Or. Rev. Stat. § 288.815 (1993). Also, the university's enabling act provides that "no obligation of any kind incurred under [Oregon Revised Statute Sections] 288.805 to 288.945 [relating to the Uniform Revenue Bond Act] shall be [considered] . . . an indebtedness of the State of Oregon." 1995 Or. Laws ch. 162 § 59.
Moreover, if there is a shortfall of university funds, secured by university generated revenues or property, available to satisfy state general bond obligations issued for university purposes, the state legislature may provide funds to satisfy the shortfall. Except for the requirement of Or. Rev. Stat. § 291.445, that general obligation bonds be paid from general fund appropriations, the legislature has no legal obligation to provide funds for bond obligations issued by the university. 1995 Or. Laws ch. 162 § 61a.
Although the Oregon legislature provided that the university "shall not be considered a unit of local or municipal government or a state agency for purposes of state statutes or constitutional provisions," 1995 Or. Laws ch. 162 § 2, which results in the fact that the Board maintains considerable authority over university affairs, Oregon law states that the university is a "government entity performing governmental functions and exercising governmental powers." 1995 Or. Laws ch. 162 §§ 2, 8. Further, the university receives funding from the state, it is controlled by the state, and it performs state-wide educational and health care functions. 1995 Or. Laws ch. 162 §§ 1(2), 1(3), 3(1)(a), 3(3)(a)-(f). Thus, the University Hospital as a component of Oregon Health Sciences University notwithstanding the relative degree of the university's operational autonomy within the general structure of Oregon's state government, retains more of the characteristics of an arm or instrumentality of the state than a political subdivision.
Federal and state cases, in Oregon, involving Oregon Health Sciences University have accorded both Oregon's state universities and the Oregon State Board of Higher Education immunity as instrumentalities of the state of Oregon.
Brinkley v. Oregon Health Sciences University, 94 Ore. App. 531, 766 P.2d 1045, 1047 (Or. App. 1988), review denied, 307 Ore. 571, 771 P.2d 1021 (Or. 1989) (Oregon Health Sciences University treated as a public body); Davis v. Harris, 570 F. Supp. 1136, 1137 (D.Or. 1983) ("Eleventh Amendment immunizes the State Board of Higher Education from action in federal court"); Penk v. Oregon State Board of Higher Education, 93 F.R.D. 45, 53 (D.Or. 1981) ("Oregon State Board of Higher Education is the state"); James & Yost, Inc. v. State Board of Higher Education, 216 Ore. 598, 340 P.2d 577, 578 (Or. 1959) (Oregon State Board of Higher Education is an instrument or arm of the state). However, since the current statutes, 1995 Or. Laws ch 162, governing Oregon Health Sciences University and the University Hospital became effective on July 1, 1995, 1995 Or. Laws ch. 162 § 95, no case interpreting the status of the university or its affiliated hospital as an Oregon public corporation, in relation to Eleventh Amendment immunity, has been decided.
Plaintiffs have argued that any judgment against the Oregon Health Sciences University Hospital would not be paid from the state treasury. Plaintiffs' Memorandum of Law at VI-27 - VI-29. Specifically, Plaintiffs assert that the University Hospital is not dependent on the state for funding, in that the hospital is financially self-sufficient as it "generated an operating profit of over $ 10 million for [the period ending May 31, 1993]," Plaintiffs' Memorandum of Law at VI-28, and only 5.6% of its revenues were attributable to state funding for the period ending May 31, 1994. Plaintiffs' Memorandum of Law at VI-27; Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 23, p. 27. However, no statutory limitations restrict the amount of funding the university and University Hospital may receive from the state. It is generally recognized that the state's obligation to contribute to the revenues of a university asserting immunity is more important than the amount of the contribution. Fitchik, 873 F.2d at 660.
In determining whether the University Hospital enjoys Eleventh Amendment immunity, the court must consider not only the extent of state funding, but also the degree of the state's oversight and control of the Health Sciences University's fiscal affairs, the university's independent ability to raise funds, whether Oregon taxes the university, and whether a judgment against the university would result in the state increasing its appropriations to the university. Kashani, 813 F.2d at 845.
In this case, Oregon Health Sciences University, with the approval of its Board, may enter into financing agreements which would be advantageous to the university. 1995 Or. Laws Ch. 162 §§ 17-21. However, there is no indication that money can be borrowed in order to pay a judgment against the university. Further, the university may issue revenue bonds, which are to be considered "obligations of a political subdivision of the state," rather than obligations of the state itself. 1995 Or. Laws ch. 162 § 60. There is no evidence in the record that money raised through the issuance of these bonds could not be used to pay a judgment against the University Hospital.
Although these considerations point away from granting Eleventh Amendment immunity, the factors presented here relating to autonomy and control by the state persuasively point toward granting immunity. Oregon Health Sciences University must, pursuant to the statutes in effect on July 1, 1995, submit a funding request to the Oregon Department of Administrative Services and the Legislative Assembly, the Oregon State Legislature, as part of the governor's budget every other year. 1995 Or. Laws ch. 162 § 13(1). Included within this budget is an allocation for the University Hospital, which is submitted by the various departments to the hospital administration, and then to the university. Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 23, pp. 6-10. Any request approved by Oregon's Legislative Assembly is appropriated to the Department of Administrative Services for direct allocation to the university. 1995 Or. Laws ch. 162 § 13(1). Thus, the fact that the Oregon Health Sciences University Hospital must submit a budget to the state for approval suggests that it is an agency of the state for Eleventh Amendment purposes. See Harden, 760 F.2d at 1163.
The mission of Oregon Health Sciences University and the University Hospital is to serve the people of Oregon as the primary provider of education in the health professions for students of the state of Oregon and the northwest region of the country. 1995 Or. Laws ch. 162 § 3(1)(a). The courts have considered education, particularly professional education, to be a recognized function of state government, so long as the educational entity does not limit enrollment to city or county residents. See Stewart, supra, at 248. As Oregon Health Sciences University and the University Hospital are intended to serve all residents of the state of Oregon, they provide a service more like that of an arm of the state in this respect.
On the other hand, despite the fact that the university must submit a budget to the Oregon Department of Administrative Services and the Oregon legislature and, as a result, receives some state appropriations, the remaining aspects of Oregon Health Sciences University and the University Hospital's economic life are largely independent of the state. The property owned or leased by the University is not subject to property taxes. 1995 Or. Laws ch. 162 § 21; Or. Rev. Stat. § 307.090(1) (1993) ("all property of the state and all public or corporate property used or intended for corporate purposes of the several counties, cities, towns, . . . and all other public or municipal corporations in this state, is exempt from taxation"). However, as under Oregon law both state and local entities are exempt from taxation, this factor does not facilitate a decision as to whether Oregon Health Sciences University Hospital is an arm of the state or a political subdivision.
As the relevant indicators of Eleventh Amendment immunity as to the University Hospital appear to point in different directions, the court must determine whether a judgment against the Oregon Health Sciences University Hospital would burden the state treasury, and ensure that the dignity of the state is preserved. Hess, supra, at 406.
Oregon Health Sciences University maintains the authority to issue bonds to raise funds and without pledging the full faith and credit of the state, but the hospital itself does not share the university's authority to use these procedures to raise funds, as only the Board possesses this power. The University Hospital does generate at present an operating profit, however this fact does not demonstrate that a judgment against the University Hospital would not require the expenditure of state resources as the purpose of immunity is that its protection does depend upon the actual outcome of the litigation, rather, it operates to bar litigation and exposure to any liability at the outset. Given the direct state control over the university's budget and overall responsibility in providing the people of Oregon with educational opportunities and health care, such a judgment would nevertheless offend the dignity of the state of Oregon. 1995 Or. Laws ch. 162 §§ 1(2), 1(3), 3(1)(a), 3(3)(a) - (f). The court therefore finds Oregon Health Sciences University Hospital is an arm or instrumentality of the state of Oregon, entitled to Eleventh Amendment protection.
3. University of California Medical Centers
Plaintiffs argue that the University of California Medical Centers at Los Angeles, Irvine, and San Diego, are "financially self-sustaining" business entities which should not be granted Eleventh Amendment immunity. Plaintiffs' Memorandum of Law at VI-17 - VI-18, VI-21, VI-24. The medical centers contend that the Regents of the University of California ("the Regents") own and operate each of the California state universities and their respective medical centers, which are part of the University of California, and therefore arms of the state of California for purposes of the Eleventh Amendment. Defendants' Reply Memorandum of Law at p. 15; Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 39, p. 8.
In determining whether the University of California Medical Centers sued are agencies of the state of California such that the state is the real party in interest, the court must review the powers, characteristics and relationships among the Regents, the University of California, and the medical centers.
Each of the California state universities and their respective Defendant medical centers are owned and operated by the Regents of the state of California, a public corporation established by the California constitution, which administers the University of California, a public trust under the California State Constitution. Cal. Const. of 1879, art. IX, § 9; Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 39, p. 9. Accordingly, California courts have considered the Regents as an arm of the state or "fourth branch of [state] government." See Regents of University of California v. City of Santa Monica, 77 Cal. App. 3d 130, 143 Cal. Rptr. 276, 279-80 (Ct.App. 2d Dist. 1978) (Regents constitute a "branch of the state itself . . . a constitutionally created arm of the state").
The Regents consist of a twenty-five member board, with seven ex-officio members, including the state's governor, lieutenant governor, superintendent of public instruction, the speaker of the California assembly, president and vice-president of the alumni association of the university, and the acting president of the university, who is appointed by the trustees of the university, and eighteen members appointed by the governor and approved by the state senate. Cal. Const. of 1879, art. IX, § 9(a). Each appointed member of the Regents serves a twelve year term. Cal. Const. of 1879, art. IX, § 9(b). Thus, the state of California is empowered to exercise, through its constitutional officers, significant direction over the operations of the Regents and the University of California system including the university medical centers. See Rutledge v. Arizona Board of Regents, 660 F.2d 1345, 1349-50 (9th Cir. 1981) (Board of Regents of University of Arizona was protected by the Eleventh Amendment where the board of regents was composed of government officials or people appointed by the governor and where the regents had to submit annual reports to the governor). See also Footnote 15, supra.
The California constitution gives the California Regents "full powers of organization and government, subject only to such legislative control as may be necessary to insure the security of its funds and compliance with the terms of the endowments of the university and such competitive bidding procedures as may be applicable...." Cal. Const. art. IX, § 9(a); Cal. Public Contract Code § 10500 et seq. (requiring competitive bidding for projects in excess of $ 50,000). These powers include holding legal title to all real and personal property of the university,
the power to sue or be sued,
to use a seal, and to delegate authority to committees or faculty as the Regents may deem appropriate. Cal. Const. art. IX, § 9(f). See Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 31, pp. 6, 19; Volume 10, Exhibit 39, pp. 46, 65, 66-67, 71, 75, 83; Volume 11, Exhibit 63, pp. 22, 65, 70-71, 78, 79, 94; Volume 11, Exhibit 67, pp. 23, 26. Similarly, the Regents have by statute the power to make contracts,
leases, and agreements including with any "state or federal agency." Cal.Educ.Code §§ 92436, 92437 (West 1989).
Moreover, the California Regents have complete power over construction projects. The Regents can issue revenue bonds to finance construction projects, and structure the terms of the bonds, including using its property to secure the bonds and redeem them. Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 39, pp. 39, 67. Further, the Regents can invest any bond proceeds in a construction fund as it desires, subject to limitations in indentures relating to the issuance of revenue bonds. See Cal.Educ.Code §§ 92441, 92482, 92525, 92532. Additionally, surplus money from revenue bonds can be used by the Regents for any purpose.
Cal.Educ.Code § 92533. However, neither the principal nor the interest on any bonds issued can create liability against the state, or the Regents, or the property or funds of either, except to the extent of the pledge of revenues in relation to which the bonds were issued. Cal. Educ. Code § 92470.
The Regents must submit reports to both houses of the California legislature on "matters pertaining to and affecting salaries, wages, hours of work, conditions of work, and other matters relating to personnel under the jurisdiction of the Regents and the employees of the University of California." Ciba-Geigy Corporation, supra, at 623.
In view of the plenary authority of the Regents over the University of California, the California courts have concluded "that the University has quasi-judicial powers over its own personnel disputes, and that the state courts must show deference when reviewing the factual findings of a University adjudicatory officer." Unix System Laboratories, Inc. v. Berkeley Software Design, Inc., 832 F. Supp. 790, 795 (D.N.J. 1993) (citing Apte v. Regents of the University of California, 198 Cal. App. 3d 1084, 244 Cal. Rptr. 312, 315-16 (Ct.App. 1st Dist. 1988); Ishimatsu v. Regents of the University of California, 266 Cal. App. 2d 854, 72 Cal. Rptr. 756, 763 (Ct.App. 1st Dist. 1968)). The "University [Regents] also has legislative powers in the sense that its policies and procedures attain 'the status of statutes in its internal governance.'" Unix System Laboratories, Inc., supra, at 795 (quoting Apte, supra, at 315)). Thus, the Regents "constitutes a branch of the state government equal and coordinate with the legislature, judiciary, and the executive branch." Ciba-Geigy Corporation, supra, at 622 (quoting 30 Ops.Cal.Atty.Gen. 162, 166 (1957)). Moreover, the University of California is defined as a "state agency" in the California Government Code Section 3202(b) (West 1995), whereas its counties, cities, political subdivisions, and municipal corporations are all defined as local agencies. Cal. Gov. Code § 3202(a) (West 1995).
In administering the trust of the University of California, the Regents were granted "all the powers necessary or convenient for the effective administration of its trust, including the power . . . to delegate to its committees or to the faculty of the university, or to others, such authority or functions as it may deem wise...." Cal. Const. art. IX, §§ 9(a), (f). Thus, the Regents have granted the medical centers the power to administer their day to day operations. See Plaintiffs' Memorandum of Law, Appendix Volume 10, Exhibit 28, p. 6, Exhibit 31, ...