United States District Court, D. Utah, Central Division
MEMORANDUM DECISION AND ORDER
SAM SENIOR JUDGE UNITED STATES DISTRICT COURT
Plaintiff, the Utah Division of Consumer Protection (the
“Division”) brought a claim against the
Defendant, Mandatory Poster Agency, Inc. (“MPA”)
in the Third Judicial District Court of Salt Lake County. MPA
removed the action based on federal diversity jurisdiction.
Plaintiff Division moves for the case to be remanded to the
Third Judicial District Court of Salt Lake County.
Division is a state agency within the Utah Department of
Commerce. Utah Code Ann. § 13-1-2(2)(e). The Division is
charged with protecting the public, and is authorized to take
action to “prevent deceptive, misleading, and false
advertising practices in Utah.” Id.
a for-profit corporation headquartered in Michigan. MPA does
business in Utah under the names Utah Council for
Corporations (“UCC”) and Utah Labor Law Poster
Service (“ULLPS”) with addresses also in
Michigan. Defendants Steven J. Fata and Joseph Fata are at
all times relevant to this case, officers, directors, and
shareholders of MPA.
the fact that plaintiff's residence is diverse from
defendant's, the Eleventh Amendment provides immunity
from liability for state entities in federal court absent a
waiver of immunity by the state. Edelman v. Jordan,
415 U.S. 651, 663 (1974). For purposes of diversity
jurisdiction, the Supreme Court has held that a state entity,
such as the Utah Department of Commerce, falls under the same
immunity for purposes of diversity jurisdiction only if it is
an “arm or alter ego of the State.” Moor v.
Alameda City, 411 U.S. 693, 717 (1973). To make the
determination whether an entity is an arm of the state, we
engage in two general inquiries: “The court first
examines the degree of autonomy given to the agency, as
determined by the characterization of the agency by state law
and the extent of guidance and control exercised by the
state. Second, the court examines the extent of financing the
agency receives independent of the state treasury and its
ability to provide for its own financing.” Watson
v. University of Utah Medical Ctr., 75 F.3d 569
(10th Cir. 1996) citing Haldeman v. State of
Wyo. Farm Loan Bd., 32 F.3d 469, 473 (10th Cir. 1994).
The Tenth Circuit has developed five factors to analyze this
autonomy; 1) whether state law explicitly identifies the
entity as an agency of the State; 2) what degree of autonomy
the entity is afforded under state law; 3) whether the entity
is state-funded or self-funding; 4) whether the entity is
primarily concerned with state or local affairs; and 5)
whether the state is liable for judgments against the entity.
Steadfast Ins. Co. v. Agric. Ins. Co., 507 F.3d
1250, 1253 (10th Cir. 2007), Colby v.
Herrick, 849 F.3d 1273, 1276 (10th Cir.
2017). Both MPA and the Division rely on these factors in
their analyses, reaching different conclusions.
Division alleges that it is not autonomous but an “arm
or alter ego” of the state and therefore not a citizen
for diversity jurisdictional purposes. MPA alleges that the
Division is autonomous under these factors. Further, MPA
requests jurisdictional discovery to determine the state
funding of the Division (factor 3) as well as The
Division's degree of autonomy under state law (factor 2).
MPA alleges that the Division has information that will allow
it to analyze these factors more extensively and that
jurisdictional discovery is necessary to make the
jurisdictional decision of citizenship. MPA has also
requested oral argument be set. Utilizing the above factors,
the court has found that the Division is an arm of the State
or a citizen for diversity jurisdiction.
MOTION TO REMAND
Division has filed a motion to remand this case back to the
state court. It argues it is an “arm of the
state” and therefore is provided Eleventh Amendment
immunity from liability in federal court. As noted above, the
Tenth Circuit has developed five factors to analyze autonomy
from the state in which an entity resides; 1) whether state
law explicitly identifies the entity as an agency of the
State; 2) what degree of autonomy the entity is afforded
under state law; 3) whether the entity is state-funded or
self-funding; 4) whether the entity is primarily concerned
with state or local affairs; and 5) whether the state is
liable for judgments against the entity. Steadfast Ins.
Co., 507 F.3d at 1253. This autonomy determines whether
an entity is an arm of the state and therefore provided
Eleventh Amendment immunity. The court will now discuss each
of the five factors considered in making its determination
that the Division is an arm of the state.
Whether state law explicitly identifies the entity as an
agency of the State
Utah State Legislature created the Division and gave it the
mandate to administer and enforce the state consumer
protection laws. Utah Code § 13-2-1. The division shall
be under the supervision, direction, and control of a
director. The director shall be appointed by the executive
director of commerce with the approval of the governor. The
director shall hold office at the pleasure of the governor.
Utah Code § 13-2-2. This hierarchy supports the
Division's argument that state law identifies the entity
as an agency of the state. While neither legislature nor case
law have ever explicitly addressed whether the Division is a
politically independent subdivision of the state or merely a
state instrumentality, the court finds that a
Legislature-created instrumentality would fall under their
state authority. Through its creation by the state, the
Legislature implied the Division would have state
jurisdiction and would not be subject to diversity
jurisdiction as a “citizen” of the state.
What degree of autonomy the entity is afforded under state
determining the degree of autonomy an entity may have, courts
look at the “state's level of guidance and control
over the entity.” Watson, 75 F.3d at 574. The
state legislature created the Division to oversee and carry
out the State of Utah's control over consumer protection.
This alone is compelling in concluding that the Division is
an instrumentality of the state and therefore not autonomous.
It is carrying out a mission of the state. In
Sturdevant, the Tenth Circuit considered whether a
Community College Board was an arm of the state. The Court
concluded that the Board held a considerable degree of
autonomy; however, “these powers must be considered in
light of the purpose, composition, and function of the state
entity in question.” Sturdevant v. Paulsen,
218 F.3d 1160, 1168 (10th Cir. 2000). This mixture
of autonomy and oversight is important in determining whether
the Division is an arm of the state. In Sturdevant,
the court found that the Board's ...