UNIX SYSTEM LABORATORIES, INC., Plaintiff, v. BERKELEY SOFTWARE DESIGN,
INC.; THE REGENTS OF THE UNIVERSITY OF CALIFORNIA; and the Following Persons in
their Individual and official Capacity as Members of the Board of the Regents of
the University of California: PETE WILSON, LEO T. MCCARTHY, WILLIE L. BROWN,
JR., BILL HONIG, DAVID P. GARDNER, RALPH M. OCHOA, GAIL G. ANDERSON, WILLIAM T.
BAGLEY, ROY T. BROPHY, CLAIR W. BURGENER, YVONNE, BRAITHWAITE BURKE, GLENN
CAMPBELL, FRANK W. CLARK, JR., DIANA DARNELL, TIRSO DEL JUNCO, ALICE J.
GONZALES, JEREMIAH F. HALLISEY, S. SUE JOHNSON, MEREDITH J. KHACHIGIAN, LEO S.
KOLLIGIAN, HOWARD H. LEACH, S. STEPHEN NAKASHIMA, YORI WADA, DEAN A. WATKINS,
HAROLD M. WILLIAMS, JACQUES S. YEAGER, CARL J. STONEY, JR., PAUL HALL, MARTIN A.
TROW AND W. ELLIOT BROWNIEE, Defendants.
Civ. No. 92-1667
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
832 F. Supp. 790; 1993 U.S. Dist. LEXIS 12964; 29 U.S.P.Q.2D (BNA) 1561; Copy.
L. Rep. (CCH) P27,166
September 7, 1993, Decided
September 8, 1993, Filed
COUNSEL: [**1] For Plaintiff: George L. Graff, Esq., James W. Kennedy,
Esq., Paul, Hastings, Janofsky & Walker, NY, NY. Michael D. Loprete, Esq., Gary
F. Werner, Esq., Crummy, Del Deo, Dolan, Griffinger & Vecchione, P.C., Newark,
NJ. Sanford Tannenbaum, Esq., General Counsel, Theodore Weitz, Esq., Senior
Corporate Counsel, Summit, NJ.
For Regents of the University of California, Defendant: Joel Linzner, Esq.,
Carla J. Shapreau, Esq., Crosby, Heafey, Roach & May, Oakland, CA. James E.
Holst, Esq., John F. Lundberg, Esq., Mary E. MacDonald, Esq., Oakland, CA.
Frederick B. Polak, Esq., Post, Polak & Goodsel, Roseland, New Jersey. For
Berkeley Software Design, Inc., Defendant: Leslie A. Fithian, Esq., Heller,
Ehrman, White & McAuliffe, Palo Alto, CA. James H. Forte, Esq., Saiber
Schlesinger Satz & Goldstein, Newark, NJ.
OPINIONBY: DICKINSON R. DEBEVOISE
OPINION: [*793] OPINION
Debevoise, District Judge.
Plaintiff Unix System Laboratories, Inc. ("USL") instituted this action seeking
relief from Defendants' past and prospective distribution of computer software
in alleged violation of Plaintiff's proprietary rights in the UNIX operating
system. Defendants now move to dismiss all of Plaintiff's claims [**2] against
the Regents in their individual and official capacities ("the Regents"), and
four of Plaintiff's five claims against the Regents in their corporate capacity
as the Board of Regents of the University of California ("the University"). n1
For the reasons given below, Defendants' motions are granted in part and denied
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n1 The Regents have three different capacities: their capacities as individuals,
their capacities as officials of the state of California, and their unitary
capacity as the University of California corporation/state agency (see infra).
The caption names the Regents in their individual and official capacities, but
the parties treat the lawsuit as one against the Regents in their official and
corporate capacities. For example, Plaintiff appears to eschew any relief
against the Regents in their individual capacities. Plaintiff's "request for
injunctive relief against the University is directed to the Regents in their
official capacity for supervising and administering the University's affairs."
(2d Am. Compl. at P 2.) Furthermore, Plaintiff states that "although it is
seeking damages against the University and BSDI, it is not seeking damages
against the Regents in their individual capacity." (Id.)
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**3]
I. STATEMENT OF FACTS
Plaintiff Unix System Laboratories ("USL") is a Delaware corporation with its
principal place of business in Summit, New Jersey. Plaintiff develops,
manufactures, licenses, and sells computer operating systems and related
products and services. Plaintiff is also the present assignee of AT&T's rights
to UNIX, the computer software at the heart of this dispute. Defendant Berkeley
Software Designs, Inc. ("BSDI") is a recently-formed Delaware corporation with
its principal place of business in Richmond Falls, Virginia. BSDI intends to
develop, manufacture, and sell computer operating systems like those of
Plaintiff. Defendant officials are members of the Board of Regents (the
"Regents") of the University. The Regents are a non-profit public corporation
organized to administer the University pursuant to the California constitution,
art. 9 § 9, and California state law.
The central issue in the case as a whole is whether Defendants appropriated
pieces of Plaintiff's allegedly proprietary program "UNIX," and then used and
distributed these pieces without authorization in violation of Plaintiff's
copyrights and trade secrets. UNIX is a computer [**4] operating system -- a
software program that oversees a computer's internal and external activities,
including processing, resource allocation, communications, and applications use.
AT&T's Bell Laboratories registered the name UNIX as Trademark No. 1,392,203 on
May 6, 1986. (1st Am. Compl. Ex. B.) In addition, AT&T has received copyright
certificates of registration on various versions of UNIX software and
documentation. (Id., Exs. C-F.)
Before exploring the details of Plaintiff's allegations, it is important to step
back and appreciate the importance of UNIX in the world of computing. All
parties agree that UNIX is one of the most highly-regarded operating systems in
the world. Numerous treatises, courses, graduate student theses, and research
projects have investigated, expounded, and improved upon UNIX. In addition,
programmers at Microsoft, Sun Microsystems, Digital, IBM, and elsewhere have all
developed their own UNIX-like, [*794] UNIX-compatible operating systems (some
under license by Plaintiff). (Carson Reply Aff. at PP 11-12.)
AT&T developed UNIX in the late 1960s and early 1970s, and then quickly began
licensing UNIX to educational, government, and commercial users, including
the [**5] University of California at Berkeley ("Berkeley"). Berkeley and AT&T
apparently collaborated on UNIX's development at least in the early years, with
AT&T personnel often visiting Berkeley for consultations. The parties executed
their first UNIX licensing agreement in 1973, and by 1979 the parties had
executed their first agreement covering the software that Plaintiff now seeks to
protect, UNIX version 32V. The 32V agreement permits the Regents to create
derivatives of UNIX and, to the extent that the derivatives are free of
proprietary information, to distribute them without restriction.
Berkeley exercised its contractual right to derivatize 32V to the hilt. It began
to create its own embellishments and additions, called Berkeley Software
Distributions ("BSD") releases, and distributed them via the Regents' Computer
Sciences Research Group ("CSRG"). In the early 1980s, Berkeley only distributed
the releases to other licensees (which now number in the thousands) because the
releases contained proprietary code governed by Berkeley's license with AT&T.
But demand for the releases from unlicensed users grew, so Berkeley began
distributing redacted releases with the proprietary material [**6] allegedly
removed. These releases included the operating system at the heart of the
present dispute, Net2, which Plaintiff has alleged violates its proprietary
rights in 32V.
Net2 apparently began as a project to develop a UNIX-like product devoid of AT&T
proprietary code. This product was to contain both non-proprietary software from
the BSD releases and software written specifically for Net2, sometimes by
volunteers. (Kennedy Aff., Ex. 6.) To guarantee that no proprietary code
remained, CSRG screened and eliminated overlapping code sections in accordance
with criteria developed together with Berkeley's legal counsel. In addition,
Berkeley "repeatedly contacted the USL licensing office, in an attempt to have
them review software we intended to distribute." (McKusick Decl. at 8.)
Plaintiff allegedly refused to cooperate, although it had performed similar
services for others.
Berkeley's decision to excise AT&T's code was motivated by several related
concerns. First, the University of California received substantial benefits by
being the center of UNIX software development, benefits that would increase if
it could expand the family of UNIX users by extending UNIX to non-licensees
(Ibid.); [**7] second, the cost of an AT&T UNIX license had increased to
around $ 200,000, excluding all but the largest users (Ibid.); third, the Net2
version of UNIX would offer new and improved services (Keith Bostic, Marshall K.
McKusick, & Michael J. Karels, Berkeley UNIX Yesterday, Today and Tomorrow, in
Kennedy Aff. Ex. 8); and finally, the CSRG programmers, at least those who
founded BSDI (Karels, McKusick, and Bostic), presumably saw in Net2 an
opportunity to profit from the widespread interest in UNIX-like systems.
The end result of Berkeley's efforts was a product that, by all accounts,
contains a very small proportion of 32V code. But this is not to say that Net2
fails to display its 32V roots. Plaintiff hired Professor John Carson to unearth
these roots and, after over 400 hours of digging, Professor Carson has now
identified a number of instances where 32V code is embedded in the Net2 system.
(Carson Aff. at P 13.) The legal significance of this code is, of course, the
central issue in the present dispute.
Berkeley began licensing and distributing Net2 in June 1991. Plaintiff has
alleged that the "highest levels," meaning persons reporting directly to the
Regents, approved Net2's [**8] release. (E.g., Proposed 2d Am. Compl. at PP 2,
9, 38, 64, 72, 89, 103.) Indeed, Plaintiff has alleged that the University
Chancellor himself approved Net2's release. (Kennedy Aff. P 16.)
An early Net2 licensee was UUNET, an electronic information exchange for people
interested in UNIX. (Adams Dep. at 149, Kennedy Aff. Ex. 12.) UUNET added Net2
to its standard archives, enabling any subscriber to UUNET to freely and
anonymously [*795] copy Net2 to their own computer system. When asked the
number of people who had copied Net2 from UUNET, Mr. Bostic replied that "I've
been told it's in the tens of thousands." (Bostic Dep. at 81, Id.). UUNET is
available to hundreds of thousands of users worldwide, including users in New
Jersey. (Rorke Aff. PP 1-4.)
One organization that obtained Net2 from UUNET was BSDI. (Adams Dep. at 149,
Kennedy Aff. Ex. 12.) BSDI, which is not licensed by AT&T to use UNIX, used Net2
to create its sole product, the operating system BSD/386 Source. (Ans. &
Countercl. at PP 5-6.) BSDI is now close to bringing BSD/386 to market, having
distributed preliminary "alpha," "beta," and "gamma" versions of BSD/386 as well
as promotional literature. This literature states that BSD/386 [**9] Source
"contains no AT&T licensed code" and "does not require a license from AT&T."
(1st Am. Compl. Ex. I.) Unless Plaintiff is successful in this suit, it will
soon have another competitor in the field of UNIX-like operating systems.
B. The Present Motions To Dismiss
The central issue in the present motions to dismiss is whether the University is
tantamount to the state of California for purposes of the Eleventh Amendment.
The University of California is defined as a state agency by state law, Cal.
Gov't Code § 3202(b), and as "a public trust, to be administered by the existing
corporation known as 'The Regents of the University of California,'" by the
California Constitution. CAL. CONST. art. IX, § 9(a). The University corporation
is comprised of:
a board composed of seven ex officio members, which shall be: the Governor,
the Lieutenant Governor, the Speaker of the Assembly, the Superintendent of
Public Instruction, the president and the vice president of the alumni
association of the university and the acting president of the university,
and 18 appointive members appointed by the Governor and approved by the
Senate . . . .
The general powers of the University [**10] are established by the California
Constitution. These powers are extensive, encompassing the "full powers of
organization and government," CAL. CONST. art. IX, § 9(a), including the powers
to manage and dispose of University property; to acquire property; to sue and be
sued; to use a seal; to delegate authority; and to be "entirely independent of
all political or sectarian influence." Id., § 9(f). Indeed, the University's
powers of organization and government are "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 made applicable . . . ." Id., § 9(a).
California courts have interpreted Article IX broadly. For example, they have
concluded that the University has quasi-judicial powers over its own personnel
disputes, and that state courts must show deference when reviewing the factual
findings of a University adjudicatory officer. Ishimatsu v. Regents of the Univ.
of Cal., 266 Cal. App. 2d 854, 864, 72 Cal. Rptr. 756 (Ct. App. 1968); Apte v.
Regents of the Univ. of Cal., 198 Cal. App. 3d 1084, 1091, 244 Cal. Rptr. 312
(Ct. App. 1988). [**11] The University also has legislative powers in the sense
that its policies and procedures attain "the status of statutes in its internal
governance." Apte, 198 Cal. App. 3d at 1092. In addition, the University can use
the power of eminent domain as necessary in the service of its other powers.
Cal. Educ. Code §§ 92040, 92431. Thus, the University appears to have all of the
adjudicative, legislative, and other public powers that the state can grant to
As a state agency, the University's property and finances are, at least in form,
extensions of those of the state. All of the University's property remains
property of the state, In re Bacon, 240 Cal. App. 2d 34, 47, 49 Cal. Rptr. 322
(Ct. App. 1966), and the state provides a substantial portion of the
University's operating budget. In 1991, this portion amounted to $ 2.3 billion,
or 33% of the University's budget. The other major sources of University funds
were the University teaching hospitals ($ 1.5 billion, 21%), and the federal
government ($ 1 billion, 15%). (Univ. of Calif. Fin. Rep., 1990-1991, Def.'s
Br., Ex. [*796] A.) However, the major source of funds for the CSRG, the group
responsible [**12] for the development and release of Net2, was neither the
University nor the state. The CSRG apparently received most of its funds by
submitting grant proposals for funding from outside sources. (Pl.'s Opp'g Br.,
The University has other attributes of a state agency as well. For example, it
is exempt from taxation by any state or local authority, Cal. Educ. Code §
92,443, and it is exempt from local building codes, regulations, permit fees,
and inspection fees for constructing improvements solely for educational
purposes. Regents v. Santa Monica, 77 Cal. App. 3d 130, 136, 143 Cal. Rptr. 276
(Ct. App. 1978).
In sum, the University has the status of a constitutional branch and independent
agency of the state of California, and it has all of the powers and rights
attendant to that status.
II. PROCEDURAL HISTORY
Plaintiff filed its complaint in this action on April 20, 1992. On April 29, the
parties agreed to a court-ordered stipulation that BSDI would cease using the
phone number "1-800-ITS-UNIX." Plaintiff did not name the University as a
defendant until July 24, 1992, when Plaintiff amended its complaint to assert
claims against "certain named individuals in their [**13] collective capacity
as The Regents of the University of California."
Even though the University came late to this action as a formal party, as an
informal participant it has been active from the beginning. Indeed, two of the
University's attorneys participated so actively in an early deposition that
Plaintiff sought sanctions against them. (Pl.'s Opp'g Br. at Ex. D.) The
magistrate judge denied the sanctions, but he did permit Plaintiff to retake the
deposition without interference from the University attorneys. (Pl.'s Opp'g Br.
at 3 n. 1.)
On the same date that Plaintiff filed its first amended complaint, I denied
Defendants' motions to dismiss Counts Ten and Eleven. Defendants answered the
complaint on September 3 and counterclaimed for declarations of noninfringement,
unenforceability, and invalidity of Plaintiff's trademark and copyrights in the
UNIX name and materials. Plaintiff replied on September 25, and subsequently
moved for a preliminary injunction against BSDI and for a second amendment of
the complaint. The University continued its active participation by opposing
Plaintiff's motion for a preliminary injunction with voluminous amicus materials
addressing numerous issues [**14] of law and fact, many of which coincided with
elements of Plaintiff's claims against the University. (Pl.'s Opp'g Br. at 5-6.)
The University cross-moved to strike pleadings, to dismiss for lack of capacity
to be sued, to dismiss for improper venue, to dismiss for lack of personal
jurisdiction, and to transfer venue. I denied all of these motions except
Plaintiff's motion to amend.
Plaintiff then brought Rule 59(a) and 52(b) motions by order to show cause. I
issued an opinion amending certain findings of fact pursuant to Rule 52(b), but
I denied Plaintiff's request for a new hearing pursuant to Rule 59(a). The
University's present motion to dismiss followed. It moves to dismiss all of the
counts of the complaint as against the Regents, and four of the five counts as
against the University. The five counts at issue here are:
Count 1: Breach of Contract. The University knowingly breached its
licensing agreements to use 32V by distributing, disclosing, and using
proprietary software in violation of the terms of the agreements. The University
acted under the authority of the Regents, who had cause to know of the breach.
Count 3: Copyright Infringement. The University and BSDI [**15] violated
Plaintiff's copyright in its Unix source code by reproducing, distributing, and
preparing derivative works of Plaintiff's source code. The University acted
under the authority of the Regents, who had cause to know of the violations.
Count 4: Misappropriation of Trade Secrets. The University and BSDI
misappropriated Plaintiff's trade secrets in violation of state law. The
University acted under the authority of the Regents, who had cause to know of
[*797] Count 6: Trademark. The University's June 28, 1991 announcement,
that its Net2 software is "available to anyone and requires no previous license,
either from AT&T or The Regents of the University of California," was materially
false and misleading in violation of the Lanham Act. The University acted under
the authority of the Regents, who had cause to know of the violation.
Count 8: Trademark. The University, in promotional materials and its
notice of copyright, misrepresented that the source code in Net2 originated
within the University, rather than with AT&T or Plaintiff. The University acted
under the authority of the Regents, who had cause to know of the
III. DISCUSSION [**16]
Defendants advance four arguments in this motion to dismiss. First, they argue
that all of the counts, to one degree or another, must be dismissed as against
the University because the University benefits from the State of California's
immunity under the Eleventh Amendment. Second, they argue that counts 3, 6, and
8 must be dismissed because the Second Amended Complaint contains no allegations
of unlawful acts in the time periods when such acts were unprotected by the
Eleventh Amendment. Third, they argue that counts 1 and 4 must be dismissed as
against the Regents because there is no federal cause of action under Ex Parte
Young for these violations of state law. Fourth, they argue that counts 3, 6,
and 8 must be dismissed as against the Regents because Plaintiff has an
available remedy against the University. Each of these arguments will be
discussed in turn below.
A. Counts 1, 3, 4, 6, And 9 Against The University
Defendants move to dismiss Plaintiff's claims against the University under the
Eleventh Amendment. Plaintiff counters this motion with two arguments: first,
that the University is not immune; and second, that even if the University is
immune, it has waived [**17] its immunity.
Defendants have styled this motion as a motion to dismiss, but they have not
otherwise identified the nature of the motion. Since Defendants are moving to
dismiss on the basis of Eleventh Amendment immunity, Defendants' motion must be
one for lack of subject matter jurisdiction. n2
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n2 The Eleventh Amendment is a jurisdictional bar that prevents a federal court
from reaching the merits of a cause of action. In re New York, 256 U.S. 490,
497, 65 L. Ed. 1057, 41 S. Ct. 588 (1921) ("the entire judicial power granted by
the Constitution does not embrace authority to entertain a suit brought by
private parties against a state without consent given"); 12 JAMES W. MOORE,
HELEN I. BENDIX, BRETT A. RINGLE, MOORE'S FEDERAL PRACTICE P 300.03[3.-5]
(1993). Because the Eleventh Amendment is a jurisdictional bar, it can be raised
at any time during the adjudicative process and on appeal. Edelman v. Jordan,
415 U.S. 651, 678, 39 L. Ed. 2d 662, 94 S. Ct. 1347 (1974) (Eleventh Amendment
immunity "sufficiently partakes of the nature of a jurisdictional bar so that it
need not be raised in the trial court").
The Eleventh Amendment is somewhat different from other limits on subject matter
jurisdiction, in that a party protected by the Eleventh Amendment can waive
immunity. In re New York, 256 U.S. at 497. Nonetheless, the proper vehicle for
challenging jurisdiction under the Eleventh Amendment is a motion to dismiss for
lack of subject matter jurisdiction. See Fitchik v. N.J. Transit Rail
Operations, Inc., 873 F.2d 655 (3d Cir.) (reversing on the merits two lower
courts' dismissals for lack of subject matter jurisdiction under Eleventh
Amendment), cert. denied, 493 U.S. 850, 107 L. Ed. 2d 107, 110 S. Ct. 148
(1989); American Bank & Trust Co. of Opelousas v. Dent, 982 F.2d 917, 920-21
(5th Cir. 1993) (reversing on the merits the lower court's dismissal for lack of
subject matter jurisdiction under Eleventh Amendment). In this regard, the
Eleventh Amendment is similar to the federal doctrine of sovereign immunity,
which must also be raised by a motion to dismiss for lack of subject matter
jurisdiction. 5A CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND
PROCEDURE § 1350 at 195-96 (1990).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**18]
A party can attack subject matter jurisdiction in one of two ways: by a facial
attack or by a factual attack. Once a party has attacked subject matter
jurisdiction in either of these ways, the party asserting jurisdiction bears the
burden of proof. The simplest form of attack, the facial attack, occurs when the
moving party challenges the allegations in the pleadings as insufficient on
their face. The court must assume that the allegations of the pleadings are
true, and then evaluate whether these allegations can [*798] support subject
matter jurisdiction. 2A JAMES W. MOORE & JO D. LUCAS, MOORE'S FEDERAL PRACTICE P
12.07[2.-1] at 12-46, 12-47 (1993).
The second form of attack, the factual attack, occurs when the moving party
challenges the jurisdictional facts themselves. Once the jurisdictional facts
have been challenged, the court may receive evidence from all parties and "no
presumptive truthfulness attaches to plaintiff's allegations, and the existence
of disputed material facts will not preclude the trial court from evaluating for
itself the merits of jurisdictional claims." Mortensen v. First Federal Sav. and
Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977) [**19] (discussing a Rule 12(b)(1)
factual attack on jurisdiction); see also Nuclear Engineering Co. v. Scott, 660
F.2d 241 (7th Cir. 1981) (once defendant attacks jurisdiction, plaintiff must
support jurisdiction with competent evidence), cert. denied, 455 U.S. 993, 71 L.
Ed. 2d 855, 102 S. Ct. 1622 (1982). The pleader's allegations are not ignored,
but "argumentative inferences favorable to the pleader will not be drawn." 5A
CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1350
In arguing the present motion, neither party has limited themselves to the
pleadings. Both parties have submitted additional materials and argued this
motion as if it were a factual attack on jurisdiction. I will do the same.
The Eleventh Amendment provides 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 by
Citizens or Subjects of any Foreign State." This provision divests the federal
courts of the power to entertain a suit brought by a private party against a
state unless either the state consents or Congress [**20] authorizes the
action. Pennsylvania v. Union Gas, 491 U.S. 1, 105 L. Ed. 2d 1, 109 S. Ct. 2273
(1989); Ford Motor Co. v. Dept. of Treasury of Indiana, 323 U.S. 459, 462, 89 L.
Ed. 389, 65 S. Ct. 347 (1944); Hans v. Louisiana, 134 U.S. 1, 15, 33 L. Ed. 842,
10 S. Ct. 504 (1840) (the Eleventh Amendment even bars suits against a state
brought by citizens of that state).
The Eleventh Amendment bars suits not only against the state itself, but also
against a subdivision of the state if the state remains "the real party in
interest." Edelman v. Jordan, 415 U.S. 651, 663, 39 L. Ed. 2d 662, 94 S. Ct.
1347 (1974); 13 FEDERAL PRACTICE AND PROCEDURE § 3524 at 140-145 (Eleventh
Amendment protects subdivisions of states such as penal institutions, highway
departments, courts, most universities, and bar associations). The state is the
real party in interest whenever "'the judgment sought would expend itself on the
public treasury or domain, or interfere with the public administration,' or if
the effect of the judgment would be 'to restrain the Government from acting, or
to compel it to act.'" Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89,
101 n. 11, 79 L. Ed. 2d 67, 104 S. Ct. 900 (1984) (quoting [**21] Dugan v.
Rank, 372 U.S. 609, 10 L. Ed. 2d 15, 83 S. Ct. 999 (1963)).
The Third Circuit has developed a nine-part test to guide the evaluation of a
defendant's entitlement to Eleventh Amendment immunity. n3 Urbano v. Bd. of
Managers [*799] of N.J. State Prison, 415 F.2d 247, 250-51 (3d Cir. 1969),
cert. denied, 397 U.S. 948, 25 L. Ed. 2d 128, 90 S. Ct. 967 (1970). For
clarity's sake, the Third Circuit has consolidated these factors into three
(1) Whether the money that would pay the judgment would come from the state
(this includes three of the Urbano factors -- whether payment will come from
the state's treasury, whether the agency has the money to satisfy the
judgment, and whether the sovereign has immunized itself from responsibility
for the agency's debts);
(2) The status of the agency under state law (this includes four factors --
how state law treats the agency generally, whether the entity is separately
incorporated, whether the agency can sue or be sued in its own right, and
whether it is immune from state taxation); and
(3) What degree of autonomy the agency has.
Fitchik v. N.J. Transit Rail Operations, Inc., 873 F.2d 655, 659 [**22] (3d
Cir.), cert. denied, 493 U.S. 850, 107 L. Ed. 2d 107, 110 S. Ct. 148 (1989).
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n3 The nine factors are:
Local law and decisions defining the status and nature of the agency
involved in its relation to the sovereign are factors to be considered, but
only one of a number that are of significance. Among the other factors, no
on of which is conclusive, perhaps the most important is whether, in the
event plaintiff prevails, the payment of the judgment will have to be made
out of the state treasury; significant here also is whether the agency has
the funds or the power to satisfy the judgment. Other relevant factors are
whether the agency is performing a governmental or proprietary function;
whether it has been separately incorporated; the degree of autonomy over its
operations; whether it has the power to sue and be sued and to enter into
contracts; whether its property is immune from state taxation, and whether
the sovereign has immunized itself from responsibility for the agency's
Urbano, 415 F.2d at 250-51.
One of these criteria, the "governmental or proprietary function" criterion, is
no longer valid. The Supreme Court rejected this criterion in a different
context in Garcia v. San Antonio Metro. Transit Authority, 469 U.S. 528, 83 L.
Ed. 2d 1016, 105 S. Ct. 1005 (1985), and the Third Circuit no longer considers
this factor germane to Eleventh Amendment analysis. Fitchik v. N.J. Transit Rail
Operations, Inc., 873 F.2d 655 (3d Cir. 1989).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**23]
The threshold issue is whether either Congress or the State of California have
abrogated Eleventh Amendment immunity with respect to the causes of action in
counts 1, 3, 4, 6, and 8. With respect to the state-law counts 1 and 4, the
answer is no. n4 However, with respect to the copyright count 3, and the
trademark counts 6 and 8, the answer is partly yes, partly no.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n4 To the extent that count 4 alleges a taking without just compensation,
Defendants' Eleventh Amendment immunity is somewhat problematic. As a practical
matter, however, it is irrelevant whether Defendants are immune from the takings
claim because, as discussed in the next section, the takings claim is not ripe.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
Under the copyright laws as they existed prior to 1990, states enjoyed immunity
under the Eleventh Amendment. Richard Anderson Photography v. Radford Univ., 852
F.2d 114 (4th Cir. 1987); Woelffer v. Happy States of America, 626 F. Supp. 499,
504 (N.D. Ill. 1985). Congress has now changed [**24] the copyright laws to
eliminate Eleventh Amendment immunity for violations on or after November 15,
1990. 17 U.S.C. § 511(a) (added 1990) (abrogating Eleventh Amendment immunity);
Copyright Remedy Clarification Act, 104 Stat. 2750, 2750 (1990) ("the amendments
made by the Act shall take effect with respect to violations that occur on or
after the date of the enactment of this Act. Approved November 15, 1990").
Similarly, under the trademark laws as they existed prior to 1992, states also
enjoyed Eleventh Amendment immunity. Woelffer, 626 F. Supp. at 504. Congress has
now changed these laws as well, to eliminate immunity for violations on or after
October 27, 1992. 15 U.S.C. § 1114(1) (added 1992) (providing remedies for
violations by state defendants); 15 U.S.C. § 1122 (added 1992) (abrogating
Eleventh Amendment immunity); Trademark Remedy Clarification Act, 106 Stat.
3567, 3568 (1992) ("the amendments made by this Act shall take effect with
respect to violations that occur on or after the date of the enactment of this
Act. Approved October 27, [**25] 1992"). Thus, the state of California is at
least partially immune from suit in federal court under each of counts 3, 6, and
This is not the first time that this district has examined whether the state of
California's immunity extends to the University. See Ciba-Geigy Corp. v. Alza
Corp., 804 F. Supp. 614 (D.N.J. 1992). In Ciba-Geigy, the court balanced the
Fitchik factors to find that the State of California was, in fact, the real
party in interest in a suit against the University. In an exhaustive opinion,
the court found that the factors favoring Eleventh Amendment immunity were, in
broad outline: (i) the University's status as a state agency, along with the
attendant immunities and privileges, id. at 622-23; (ii) the state's influence
over the University, as manifested by the state's role in prescribing procedures
for competitive bidding, in requiring regular personnel reports, and in placing
state officials and appointees as Regents, id. at 623-24; [*800] and (iii) the
state's control over the University's finances and liability for its debts, id.
at 624. [**26] The factors weighing against immunity were less substantial,
including (i) the state's share of the University's budget (only about 33%) and
(ii) the University's insurance against certain litigation risks.
The Ciba-Geigy court assessed these various factors primarily by analyzing the
constitution, statutes, and case law of California. To the degree that factual
matters entered into its assessment, these factual matters tended to work
against immunity. For example, the court noted that the University relied on
outside funding for the greatest part of its budget, with the state supplying
only 33%. (This funding rate remains the same in the present action.)
The discussion in Ciba-Geigy is complete, well-reasoned and, for the most part,
directly applicable to the present case. I will accept its rationale.
Accordingly, unless Plaintiff can distinguish the present case from Ciba-Geigy,
or prove that the University has waived its immunity, I shall grant Defendants'
motion to dismiss.
Plaintiff attempts to distinguish this case from Ciba-Geigy by drawing attention
to the source of funding of the CSRG, the group that oversaw the development and
release of Net2. Plaintiff argues [**27] that, because the CSRG funded itself
through grant proposals and certain commercial activities, the University cannot
claim Eleventh Amendment immunity. In essence, Plaintiff appears to be arguing
that the CSRG, separated from the remainder of the University, would not be
entitled to immunity under the Eleventh Amendment. Perhaps not -- but Plaintiff
has sued the University as a whole, not the CSRG as a separate entity.
Accordingly, Plaintiff must argue that the CSRG's funding through grants and
other activities undercuts the immunity of the entire University.
To test this argument, it is necessary to examine how the CSRG's funding fits
into the Third Circuit's criteria listed above. The funding is irrelevant to the
first group of Fitchik factors, since these factors relate to who would bear the
cost of any judgment against the University. The funding has somewhat more
relevance to the second group of factors, all of which relate to the
University's status as an institution under state law. If the University, by
permitting the CSRG to receive outside funding, has exceeded its constitutional
and statutory role as an arm of the state, then the CSRG's funding would weigh
against [**28] immunity under the Eleventh Amendment. But the University has
not exceeded its role as an arm of the state in permitting the CSRG to receive
outside funding. The University's statutory mandate is to "be the primary
state-supported academic agency for research," Cal Educ. Code § 66010.4(d), and
it is well-known that much or most university research is funded through outside
grants. By the same logic, the CSRG's funding is not determinative of the third
factor, the University's autonomy. Even if the CSRG is autonomous in terms of
outside funding, the CSRG remains as much a part of the University as the
University's other research groups.
Significantly, the CSRG's funding is irrelevant to the findings at the heart of
the opinion in Ciba-Geigy:
[the University's elevated status as a "fourth branch of government" under
the California Constitution, the fact that California has not detached
itself from the Regents debts, and the fact that [the Regents'] membership
consists overwhelmingly of governmental officials or people chosen by the
Governor upon the consent and advice of the Senate.
804 F. Supp. at 625.
Since the facts here are similar to those [**29] in Ciba-Geigy, and the logic
of Ciba-Geigy is sound, I will reach the same result. I conclude that, in the
absence of a waiver, the University shares the Eleventh Amendment immunity of
California. This conclusion is consonant with the holdings of the many other
federal courts that have examined this issue. See Hamilton v. Regents of the
University of California, 293 U.S. 245, 257, 79 L. Ed. 343, 55 S. Ct. 197
(1934); BV Engineering v. University of California, Los Angeles, 858 F.2d 1394,
1395 (9th Cir. 1988), cert. denied, 489 U.S. 1090, 103 L. Ed. 2d 859, 109 S. Ct.
1557 (1989); Thompson v. Los Angeles, 885 F.2d 1439, 1442-43 (9th Cir. 1992);
[*801] Armstrong v. Meyers, 964 F.2d 948, 949-950 (9th Cir. 1992); (see also
Defs.'s Supp'g Br. at 12 n. 9).
Plaintiff's final argument against immunity is that the University has now
waived any immunity that it might once have had. Plaintiff relies primarily on
Cobb Coin Co., Inc. v. Unidentified, Wrecked & Abandoned Sailing Vessel, 549 F.
Supp. 540 (S.D. Fla. 1982). In Cobb Coin, the plaintiff filed an in rem
[**30] complaint to resolve its rights to the defendant sunken ship. The State
of Florida intervened, and filed an answer and counterclaim for a declaratory
judgment of ownership. Less than a month later, the state moved to enjoin the
plaintiff from developing the site, and then proceeded with vigorous motion
practice and discovery. The state later moved to dismiss its counterclaim and,
after the court granted the motion, moved to dismiss the complaint pursuant to
the Eleventh Amendment. The court denied the motion, finding that the State,
through its voluntary entry and active participation in the litigation, had
waived its immunity.
The other cases cited by Plaintiff are similar: they all involve actions in
which the state acted as an affirmative participant rather than as a beleaguered
defendant. n5 See, e.g. Vecchione v. Wohlgemuth, 558 F.2d 150 (3d Cir.)
(defendant waived Eleventh Amendment immunity by entering into consent decree
without subsequent appeal), cert. denied, 434 U.S. 943, 54 L. Ed. 2d 304, 98 S.
Ct. 439 (1977); Garrity v. Sununu, 752 F.2d 727 (1984) (defendant who lost at
trial, and then largely complied with the [**31] resulting judgment decree,
waived Eleventh Amendment immunity as defense against attorneys fees); Paul N.
Howard Co. v. Puerto Rico Aqueduct Sewer Authority, 744 F.2d 880 (1st Cir. 1984)
(defendant who filed counterclaim and third-party complaint waived Eleventh
Amendment immunity), cert. denied, 469 U.S. 1191, 83 L. Ed. 2d 970, 105 S. Ct.
965 (1985); Newfield House v. Mass. Dep't of Publ. Welfare, 651 F.2d 32 (1st
Cir.) (defendant who sought removal arguing that Eleventh Amendment did not bar
federal jurisdiction, and who filed counterclaim, waived Eleventh Amendment
immunity), cert. denied, 454 U.S. 1114, 70 L. Ed. 2d 653, 102 S. Ct. 690 (1981).
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n5 Some of the cases cited by Plaintiff -- even recent ones -- propose that "it
has long been established that a general appearance may constitute . . . a
waiver" of Eleventh Amendment immunity. Paul N. Howard Co., 744 F.2d 880, 886
(1st Cir. 1984), cert. denied, 469 U.S. 1191, 83 L. Ed. 2d 970, 105 S. Ct. 965
(1985); see also Newfield House, Inc. v. Massachusetts Dept. of Publ. Welfare,
651 F.2d 32, 36 n. 3 (1st Cir.), cert. denied, 454 U.S. 1114, 70 L. Ed. 2d 653,
102 S. Ct. 690 (1981). As authority for this proposition, these cases cite Clark
v. Barnard, 108 U.S. 436, 447, 27 L. Ed. 780, 2 S. Ct. 878 (1883). In Clark, the
Supreme Court upheld jurisdiction over a state that had intervened to claim a
fund paid into the court. The Court noted that had the state been a defendant
from the beginning, and had the state's only action been a special appearance to
protest jurisdiction, then the state would have retained its full immunity under
the Eleventh Amendment.
The Federal Rules of Civil Procedure have eliminated the dichotomy between
special appearances and general appearances. Now, a party can join its
jurisdictional defenses into a motion with other defenses, or even into its
answer and counterclaim. Neifeld v. Steinberg, 438 F.2d 423, 428-29 (3d Cir.
1971). Accordingly, it makes little sense to continue to distinguish between
general and special appearances in Eleventh Amendment jurisprudence. In all
other respects, Clark seems perfectly compatible with my decision here. In
Clark, the state waived its immunity because it entered the action voluntarily
to seek affirmative relief. Here, the state entered the action involuntarily,
and it has sought only to exit as quickly as possible for reasons unrelated to
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**32]
In the present case, the University has not acted as an affirmative participant.
The University has not counterclaimed, filed a third-party complaint, removed to
federal court, or even answered. Of course, the University has not been silent
-- it has moved to dismiss and strike pleadings because the individual Regents
originally named in the caption lacked the capacity to be sued; it has moved to
dismiss for lack of personal jurisdiction over the University of California; and
it has moved to dismiss or transfer for inconvenient or improper venue. But
these motions do not create a waiver. Even if I dismiss the state law counts
against the University, it may remain a defendant in the federal counts for
which Congress has abrogated immunity under the Eleventh Amendment. As such, it
is entitled to defend itself as earnestly as any other defendant, and to
[*802] do so with all of the weapons in the arsenal of the Federal Rules of
Similarly, I find that the aggressive behavior of the University's counsel
during the McKusick deposition is not sufficient to establish that the
University has waived its immunity by affirmatively seeking relief in federal
court. The University has, [**33] as yet, sought no relief other than to
escape from this case without litigating it on the merits.
Accordingly, I shall dismiss counts 1 and 4 against the University; I shall
dismiss count 3 against the University to the extent that it states a claim for
violations before November 15, 1990; and I shall dismiss counts 6 and 8 against
the University to the extent that they state claims for violations before
October 27, 1992.
B. Failure To Allege Unlawful Acts In Counts 3, 6, And 9
Defendants next contend that Plaintiff has failed to allege that the University
committed any wrongful acts after it lost its Eleventh Amendment immunity under
the copyright and trademark laws.
With respect to the copyright claim in count 3, I find that Plaintiff has
alleged facts sufficient to state a cause of action. Plaintiff roots count 3 at
least in part in the University's distribution of Net2 software, a distribution
covered by the allegations in paragraph 38: "on or about June 28, 1991, the
University -- at the behest of BSDI's founders -- commenced the distribution by
CSRG of the Net2 software." (2d Am. Compl. at P 38.) Since the June 28, 1991
distribution occurred after the University lost [**34] its Eleventh Amendment
immunity from the copyright laws, I will grant Defendants' motion to dismiss
count 3 only to the extent that it states a claim against the University for
violations before November 15, 1990.
With respect to the trademark claims in counts 6 and 8, however, the situation
is less clear. Plaintiff has drawn count 6 quite narrowly, apparently to cover a
single wrongful act: "the University's June 28, 1991 announcement that its Net2
software is 'available to anyone and requires no previous license, either from
AT&T or The Regents of the University of California' is materially false and
misleading . . . ." (2d Am. Compl. at P 87.) Since this wrongful act occurred
before Congress' elimination of Eleventh Amendment immunity, I find that count 6
fails to state a cause of action against the University.
Count 8 is less narrow than count 6. In count 8, Plaintiff alleges that
"statements made by the University in promotional materials, and the copyright
notice affixed by the University to its Net2 software, falsely represent or
imply that the source code embodied in the Net2 software originates with CSRG,
and not with AT&T or USL." (2d Am. Compl. at P 101.) It is not clear [**35]
when the University distributed the promotional materials referred to in this
count, but to the extent that Plaintiff is alleging acts after October 27, 1992,
this count states a claim against the University under the Lanham Act.
In summary, I find that counts 3 and 8 contain allegations that the University
committed wrongful acts after it lost its immunity under the Eleventh Amendment.
Count 6 does not, and it shall be dismissed in its entirety.
C. Counts 1 And 4 Against The Regents
Counts 1 and 4 state causes of action for breach of contract and
misappropriation of trade secrets, respectively. Plaintiff brings these counts
pursuant to the legal fiction adopted by Ex parte Young, 209 U.S. 123, 52 L. Ed.
714, 28 S. Ct. 441 (1908), to avoid the jurisdictional bar of Eleventh Amendment
Ex parte Young grew out of a series of lawsuits brought by railroad stockholders
to enjoin the implementation and enforcement of certain state laws regulating
railroad carriage rates. Edward Young, the state attorney general, argued that
the suits were barred under the Eleventh Amendment. The Supreme Court disagreed,
offering the syllogism that (i) the Eleventh Amendment only barred [**36] suits
against those acting under state authority, and (ii) a state lacked the power to
authorize an unconstitutional act, hence (iii) the Eleventh Amendment did not
[*803] bar suits against those acting in violation of the constitution.
In the years since Ex parte Young, the Supreme Court has refined its holding
several times. In 1974, the Court took a significant step by limiting the relief
available against a state official to prospective injunctive relief only,
exactly the relief sought in Ex parte Young. Edelman v. Jordan, 415 U.S. 651, 39
L. Ed. 2d 662, 94 S. Ct. 1347 (1974). Ten years later, the Court took another
significant step and limited the grounds for relief to federal causes of action:
"we conclude that Young and Edelman are inapplicable in a suit against state
officials on the basis of state law.", 79 L. Ed. 2d 67, 104 S. Ct. 900 465 U.S.
89, 106 (1984). It is this latter decision that Defendants invoke in their
motion to dismiss counts 1 and 4.
Counts 1 and 4, on their face, allege state law causes of action against state
officials, and it appears that they must fail under Pennhurst. However, in its
opposing brief, Plaintiff [**37] now argues for the first time that count 4 in
fact contains two grounds: a state-law ground for misappropriation, and a
federal ground alleging an unlawful taking without just compensation. U.S.
CONST. amends. V, XIV. Accordingly, it is necessary to examine count 4 to see if
it does, in fact, state a federal takings claim.
In interpreting the allegations of a complaint, a court is not limited to the
legal theories named in the complaint. Rather, "'the court is under a duty to
examine the complaint to determine if the allegations provide for relief on any
possible theory.'" O'Boyle v. Jiffy Lube Int'l, Inc., 866 F.2d 88, 93 (3d Cir.
1989) (quoting 5A CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND
PROCEDURE § 1357 (1969)). "The Federal Rules reject the approach that pleading
is a game of skill in which one misstep by counsel may be decisive to the
outcome." Conley, 355 U.S. 41, 48. As long as pleadings "discharge the function
of giving the opposing party fair notice of the nature and basis or grounds of
the claim and a general indication of the type of litigation involved," the
pleadings have served their purpose. [**38] In other words, if Plaintiff has
alleged sufficient facts to state a takings claim in count 4, then it is
irrelevant that Plaintiff has styled this count as a state misappropriation
As an initial matter, even if Plaintiff has stated a takings claim, there is
some question as to whether the Eleventh Amendment bars a just compensation
claim from federal court. Ex parte Young only allows a party to bring an action
for injunctive relief against a state, and the fifth amendment, on its face,
requires only compensatory relief: "nor shall private property be taken for
public use, without just compensation." U.S. CONST. amend. V; see Ruckelshaus v.
Monsanto Co., 467 U.S. 986, 1016, 81 L. Ed. 2d 815, 104 S. Ct. 2862 (1984)
("equitable relief is not available to enjoin an alleged taking of private
property . . . when a suit for compensation can be brought"). In other words, it
appears that the compensation required by the fifth amendment might not be
available under Ex parte Young.
At least one court has adopted this line of reasoning, holding that the Eleventh
Amendment bars monetary relief for just compensation against a state in federal
court. Chavous v. South Carolina Coastal Council, 745 F. Supp. 1168 (D.S.C.
1990), [**39] vacated as moot sub nom. Esposito v. South Carolina Coastal
Council, 939 F.2d 165 (4th Cir. 1991), cert. denied, 120 L. Ed. 2d 898, 112 S.
Ct. 3027 (1992). But other courts have questioned this reasoning, and even the
Chavous court might reason differently were the just compensation issue to arise
again. The Fourth Circuit vacated Chavous on other grounds, but the dissent
attacked the district court's reasoning as contrary to the spirit of the Supreme
Court's opinion in First English Evangelical Lutheran Church v. Los Angeles
Cty., 482 U.S. 304, 317, 96 L. Ed. 2d 250, 107 S. Ct. 2378 (1987). The dissent
remarked that if the district court were correct, then the "[Takings] Clause
could be converted from a fundamental constitutional right into an empty
admonition." Esposito, 939 F.2d at 173 n. 3 (Hall, J., dissenting).
Accordingly, I will assume that the Eleventh Amendment does not bar any takings
claims that Plaintiff has asserted against the [*804] Regents, whether for
injunctive relief or for just compensation.
To state a takings claim, Plaintiff must prove that (i) private property (ii)
has been taken for (iii) [**40] public use (iv) without just compensation. The
first of these requirements is satisfied because trade secrets are property
rights under state law. Monsanto, 467 U.S. at 1012 (Congress cannot preempt
state rights against public disclosure of proprietary data); N.J. State Chamber
of Commerce v. Hughey, 600 F. Supp. 606 (D.N.J.), rev'd in part on other
grounds, 774 F.2d 587 (3d Cir. 1985). The second and third requirements are
satisfied because Plaintiff has sufficiently alleged that its property rights
have been taken by the Regents.
The fourth requirement, the denial of just compensation, is more problematic,
and I have uncovered no cases directly on point. However, by analogy to takings
cases brought against the United States, I find that Plaintiff cannot bring a
takings claim against a state official in federal court until Plaintiff has
sought just compensation in state court assuming, of course, that California has
the legal machinery necessary for Plaintiff to recover such compensation.
The analogous takings cases against the United States are those cases in which a
party has applied for [**41] injunctive relief against a federal takings
without just compensation. The Supreme Court has routinely held that, in such
circumstances, the taking claim is not ripe until after the plaintiff has
applied for compensation from the Court of Federal Claims under the Tucker Act.
See, e.g., Preseault v. I.C.C., 494 U.S. 1, 11-12, 108 L. Ed. 2d 1, 110 S. Ct.
914 (1990) ("takings claims against the Federal Government are premature until
the property owner has availed itself of the process provided by the Tucker
Act"); Monsanto, 467 U.S. at 1016-1017 (equitable relief is premature if
plaintiff has a remedy under the Tucker Act); Larson v. Domestic & Foreign
Corp., 337 U.S. 682, 697 n. 18, 93 L. Ed. 1628, 69 S. Ct. 1457 (1949) (sovereign
immunity bars a takings claim for specific relief in district court if a remedy
exists under the Tucker Act); Hurley v. Kincaid, 285 U.S. 95, 104, 76 L. Ed.
637, 52 S. Ct. 267 (1932) (equitable relief is unavailable if plaintiff has a
remedy under the Tucker Act).
The Tucker Act has two operative sections, 28 U.S.C. §§ 1346 & 1491. The first
of these sections grants jurisdiction to the district [**42] courts over
certain claims against the United States for $ 10,000 or less:
The district courts shall have original jurisdiction, concurrent with the
United States Claims Court, of: . . . (2) Any other civil action or claim
against the United States, not exceeding $ 10,000 in amount, founded either
upon the Constitution, or any Act of Congress, Or any regulation of an
executive department, or upon any express or implied contract with the
United States, or for liquidated or unliquidated damages in cases not
sounding in tort . . . .
28 U.S.C. § 1346(a). The second section grants jurisdiction to the Court of
Federal Claims over these claims regardless of amount:
The United States Court of Federal Claims shall have jurisdiction to render
judgment upon any claim against the United States founded either upon the
Constitution, or any Act of Congress or any regulation of an executive
department, or upon any express or implied contract with the United States,
or for liquidated or unliquidated damages in cases not sounding in tort.
28 U.S.C. § 1491(a)(2). In addition, the jurisdiction of the Court of
Federal [**43] Claims includes limited equitable and declaratory powers:
To afford complete relief on any contract claim brought before the contract
is awarded, the court shall have exclusive jurisdiction to grant declaratory
judgments and such equitable and extraordinary relief as it deems proper,
including but not limited to injunctive relief.
28 U.S.C. § 1491(a)(3).
Thus, in the case of a takings claim against the United States, the Court of
Federal Claims and district courts have concurrent jurisdiction over claims up
to $ 10,000, and the Court of Federal Claims has exclusive [*805] jurisdiction
on claims beyond that amount. However, if a plaintiff wishes injunctive relief,
the plaintiff must ordinarily bring suit in federal district court. Because of
this jurisdictional structure, federal takings cases usually reach district
court as suits for declaratory and injunctive relief. The district courts, but
not the Court of Federal Claims, can grant this relief, whereas the Court of
Federal Claims, but not the district court, can grant relief for compensatory
damages over $ 10,000.
One such federal takings case is Monsanto. In Monsanto, the appellee [**44]
Monsanto sought to protect its trade secrets from disclosure under the reporting
requirements of the Federal Insecticide, Fungicide, and Rodenticide Act
("FIFRA"), 7 U.S.C. § 136 et seq. Monsanto argued that the disclosure
requirements of FIFRA were unconstitutional because, among other things, they
took Monsanto's trade secrets without just compensation. The district court
agreed, and declared the relevant provisions of FIFRA to be unconstitutional.
The appellants in Monsanto appealed the district court's decision directly to
the Supreme Court, where the Court held that the district court had erred in
even reaching the takings claim. The court explained its holding as follows:
Because we hold that the Tucker Act is available as a remedy for any
uncompensated taking Monsanto may suffer as a result of the operation of the
challenged provisions of FIFRA, we conclude that Monsanto's challenges to
the constitutionality of the arbitration and compensation scheme are not
ripe for our resolution. Because of the availability of the Tucker Act,
Monsanto's ability to obtain just compensation does not depend solely on the
validity of the statutory [**45] compensation scheme. n6
467 U.S. at 1019. In other words, Monsanto's complaint was not properly before
the district court because Monsanto had failed to seek just compensation first.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n6 Under FIFRA, a pesticide manufacturer must register its pesticides with the
Environmental Protection Agency ("EPA") before selling the pesticides in
interstate or international commerce. See generally 7 U.S.C. § 136a. In its
application for registration, the manufacturer must include various test data
demonstrating the safety and efficacy of its product. Once the manufacturer has
submitted this test data, however, it loses its control over the data. The EPA
can disclose certain portions of the data to other applicants for use in
registration applications so long as the other applicants agree to compensate
the manufacturer who originally developed the data. 7 U.S.C. § 136a(c)(1)(F).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
Another instructive case is Security Sav. Bank v. Director, Office of Thrift
Supervision, 798 F. Supp. 1067 (D.N.J. 1992) [**46] (Gerry, C.J.). In this
case, the plaintiff Security Savings Bank sued the Office of Thrift Supervision
("OTS") for declaratory and injunctive relief on its breach of contract and
takings claims. The court dismissed the suit for lack of subject matter
jurisdiction, because the Court of Federal Claims had exclusive jurisdiction of
the suit under the Tucker Act. The court suggested several different rationales
for its conclusion, one of which is particularly appropriate here:
The Tucker Act's jurisdiction over takings claims is thus made exclusive by
the nature of the constitutional guarantee itself. Where just compensation
is available, a taking is not unconstitutional; the availability of just
compensation under the Tucker Act in the Claims Court therefore vitiates the
need for any other relief in any other court.
798 F. Supp. at 1072.
It is conceivable that the reasoning behind Security Savings, Monsanto, and the
other federal takings cases might not apply here because, as noted above, these
cases involved takings claims against the federal government for injunctive
relief, not takings claims against state governments for just compensation.
But [**47] the Supreme Court has expanded the scope of the federal takings
cases by relying on them in analyzing takings claims against the state for just
compensation. A pertinent example of such a case is Williamson Planning
Commission v. Hamilton Bank, 473 U.S. 172, 87 L. Ed. 2d 126, 105 S. Ct. 3108
In Williamson, appellees brought suit in district court for just compensation
against a [*806] regional planning commission, alleging that the commission
had taken property through the application of various zoning laws and
regulations. The jury found for appellees in the sum of $ 350,000, which the
court then rejected in a judgment for appellants notwithstanding the verdict.
Appellees appealed successfully to the court of appeals, but the Supreme Court
reversed the court of appeals and remanded the case as premature.
The Supreme Court held that before a takings claim was ripe, the planning
commission must have reached a final decision on compensation to the appellee.
The onus of obtaining this decision was not on the commission, however, but
rather on the appellee. Among other things, the appellee must have submitted
alternative plans, sought variances, and brought suit for inverse
condemnation [**48] before the denial of compensation would become final. 473
U.S. at 187-91, 196.
The Supreme Court resolved Williamson using the same principles that it used for
federal takings cases such as Monsanto. Indeed, the Supreme Court cited Monsanto
itself for the proposition that "if the [state] government has provided an
adequate process for obtaining compensation, and if resort to that process
'yields just compensation,' then the property owner 'has no claim against the
Government' for a taking." Williamson Planning Comm'n, 473 U.S. at 194 (citing
Monsanto, 467 U.S. at 1013, 1018, n. 21).
In sum, the federal takings cases and Williamson teach that a plaintiff cannot
bring a takings claim in federal district court, whether for injunctive relief
or damages, until the plaintiff has sought and been denied just compensation.
This bar against federal takings relief is more than a jurisdictional bar under
the Tucker Act; until a plaintiff has sought just Compensation, there is no case
or controversy. "Where just compensation is available, a taking is not
unconstitutional." Security Sav. Bank, 798 F. Supp. at 1072. [**49] Thus, until
a plaintiff has availed itself of a state's "adequate process for obtaining
compensation," the plaintiff has suffered no harm and has no federal cause of
One key assumption of all of these holdings is that the plaintiff can, indeed,
receive just compensation under the Tucker Act. If "'compensation under the
Tucker Act is unavailable or inadequate, the plaintiff is entitled to equitable
relief even in a United States District Court.'" Carteret Sav. Bank v. Office of
Thrift Supervision, 963 F.2d 567, 582-83 (3d Cir. 1992) (quoting Carteret Sav.
Bank FA v. Office of Thrift Supervision, 762 F. Supp. 1159, 1179 (D.N.J. 1991),
vacated, 963 F.2d 567 (3d Cir. 1992)). However, courts generally find that
compensatory damages are adequate except in the most dire of cases. For example,
compensatory damages are adequate even when a plaintiff faces "takings resulting
in significant losses of business, including the closing down of a business."
963 F.2d at 584 (citing Regional Rail Reorganization Act Cases, 419 U.S. 102
(1974)); [**50] Security Savings, 798 F. Supp. at 1072-73, n. 7 (finding no
jurisdiction over claim for equitable relief because plaintiff alleged only
that, without equitable relief, it would go out of business).
Plaintiff has raised concerns here about the adequacy of state compensation. At
oral argument, Plaintiff suggested that California law did not provide for
injunctive relief against the University, relief that Plaintiff believes is
necessary. Given the strong showing necessary to overcome the presumption in
favor of compensation, Plaintiff's concerns are not determinative. Even were
Plaintiff to face dissolution as a result of Defendants' acts, compensatory
damages would still be the appropriate remedy.
Consequently, I find that Plaintiff must seek just compensation in state court,
if possible, before its federal claim is ripe. n7 The Court in Monsanto endorsed
a similar argument, [*807] except that the compensation suit was to be brought
in the Court of Federal Claims rather than state court. I find that the present
case is sufficiently like Monsanto to require the same result: Plaintiff's
takings claim will not be ripe until Plaintiff has sought just
compensation [**51] in state court. n8 Since Plaintiff has no takings claim,
counts 1 and 4 must be dismissed as against the Regents.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n7 Plaintiff does not claim that its state law remedies are inadequate, e.g.
because they do not provide it with due process of the law. Accordingly, I will
not reach this issue, although it appears that a post-deprivation state-law tort
claim provides all the process that Plaintiff is due. See Parratt v. Taylor, 451
U.S. 527, 68 L. Ed. 2d 420, 101 S. Ct. 1908 (1981) (only post-deprivation
process is necessary if pre-deprivation process is impractical); Mathews v.
Eldridge, 424 U.S. 319, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976) (due process
balancing test includes considerations of efficiency). Assuming that Plaintiff
has no due process claim, "it would be 'surprising indeed to discover' the
challenged [acts] nonetheless violate the takings clause." Concrete Pipe &
Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal.,
124 L. Ed. 2d 539, 113 S. Ct. 2264, 1993 WL 196,881 (U.S. June 14, 1993)
(quoting Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 223, 89 L.
Ed. 2d 166, 106 S. Ct. 1018 (1986)). [**52]
n8 In Williamson, the Supreme Court held that exhaustion of state remedies was
not necessary in order to bring a takings claim in federal court. 473 U.S.
192-93. Thus, it seems that Plaintiff could return to federal court after an
adjudication of its compensation claims at the trial level, without the need for
appeal. If Plaintiff does so, it may qualify for an exception from the
principles of res judicata. Fields v. Sarasota Manatee Airport Auth., 953 F.2d
1299 (11th Cir. 1992).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
This result not only conforms with the takings jurisprudence of the Supreme
Court, it also conforms with Eleventh Amendment jurisprudence and with common
sense. If Plaintiff could bring a takings claim in the present case, then
plaintiffs could also bring takings claims every time a state agency breached a
contract or committed a tort that deprived a plaintiff of property. In other
words, all contract and property claims against state officials would become
federal claims within the subject matter jurisdiction of federal courts. 28
U.S.C. § 1331. [**53] Federal courts would be forced to do exactly what the
Eleventh Amendment would otherwise preclude:
it is difficult to think of a greater intrusion on state sovereignty than
when a federal court instructs state officials on how to conform their
conduct to state law. Such a result conflicts directly with the principles
of federalism that underlie the Eleventh Amendment.
Pennhurst, 465 U.S. at 106; see also Casey v. Depetrillo, 697 F.2d 22, 23 (1st
Cir. 1983) (a breach of contract is not a violation of due process, and "no
different result is required under the Takings Clause"); HMCA (Carolina), Inc.
v. Soler-Zapata, 778 F. Supp. 1234, 1239 (D.P.R. 1991) ("the takings claim is
but an extension of [plaintiff's] allegations of breach of contract, none of
which raise a question under the Constitution").
D. Counts 3, 6, And 8 Against The Regents
Defendants' final argument is that Plaintiff can bring a cause of action under
Ex parte Young against the Regents only if Plaintiff has no cause of action
against the University. Therefore, "because there are statutory remedies
against [**54] the University for any future violations of either the Copyright
Act or the Lanham Act, there is no justification for naming the individual
Regents as defendants in these claims." (Defs.' Supp'g Br. at 15.)
Defendants cite no cases with holdings that support this argument, n9 justifying
it instead as a logical necessity. Defendants' reasoning seems to be as follows:
Ex parte Young is necessary so that a party can sue a state for injunctive
relief in the absence of other remedies against the state; here, Plaintiff has
other remedies against the state; so Ex parte Young is unnecessary; and
therefore, Ex parte Young must be unavailable.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n9 Defendants suggest that Pennhurst, 465 U.S. at 105, supports their
proposition that Ex parte Young is necessarily only an alternative to
direct claims against the state. The cited page appears to support a somewhat
different proposition, namely that Ex parte Young is a limited circumvention of
the Eleventh Amendment "necessary to permit the federal courts to vindicate
federal rights and hold state officials responsible to 'the supreme authority of
the United States.'" Pennhurst, 465 U.S. at 105 (quoting Ex parte Young, 209
U.S. at 160). The limitation in Pennhurst is not on the nature of the actions
available under Ex parte Young, but rather on the nature of the relief.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**55]
Defendants' argument is unpersuasive, especially in the present case. Here,
Plaintiff can only state a cause of action against the University for violations
occuring after Congress' [*808] waiver of Eleventh Amendment immunity. By
comparison, Plaintiff can state a cause of action against the Regents for any
act within the limitations period. Thus, it is conceivable that Plaintiff could
succeed in its claims against the Regents yet fail against the University.
However, even if Plaintiff's claims were duplicative, there is no rule of
federal law that requires a party to pare redundant claims from a complaint. See
FED. R. CIV. P. 8(a)(3) ("relief in the alternative or of several different
types may be demanded"); see also FED. R. CIV. P. 8(e) ("[a] party may also
state as many separate claims or defenses as the party has"). As a practical
matter, of course, it may make little difference whether Plaintiff names the
University or the Regents as defendants in its efforts to obtain injunctive
Accordingly, Defendants' motion to dismiss claims 3, 6, and 8 against the
Regents is denied.
I will grant Defendants' motion to dismiss count 1 in its entirety; count
3 [**56] against the University to the extent that it states a cause of action
for acts prior to November 15, 1990; count 4 against the Regents and the
University; count 6 against the University; and count 8 against the University
to the extent that it states a cause of action for acts prior to October 27,
1992. An appropriate order shall issue.
Dickinson R. Debevoise, U.S.D.J.
Date: Sept. 7, 1993