Earl Patterson v. Pennsylvania Liquor Control Board

Earl Patterson was employed as a maintenance person

for the Pennsylvania Liquor Control Board (“PLCB”) when he

reported for duty at a PLCB-operated liquor store in

Eddystone, Pennsylvania. Shortly after his arrival, the

location’s assistant manager accused him of attempting to rob

the store. Patterson was detained by the police as a result of the

PLCB employee’s accusation. Patterson filed a Complaint

pursuant to 42 U.S.C. §§ 1981 and 1983 against the PLCB

alleging race discrimination and violations of Fourteenth

Amendment Equal Protection in connection with these events.

Patterson now appeals the District Court’s Order granting the

PLCB’s motion to dismiss his Complaint on Eleventh

Amendment sovereign immunity grounds.1 For the reasons

that follow, we will affirm.

I.

On the morning of November 17, 2014, Patterson—an

African-American male and a longtime PLCB employee

performing maintenance—arrived at a PLCB-run store in

Eddystone, Pennsylvania to inquire about the store’s operating



1 Patterson has withdrawn his claim under 42 U.S.C. § 1981,

and now bases his appeal on the District Court’s

determination that his claim under 42 U.S.C. § 1983 is barred

on Eleventh Amendment sovereign immunity grounds.

3

condition. Upon his arrival, Patterson asked for a manager and

was directed by a store clerk to the assistant manager. Patterson

then identified himself to the assistant manager as a

maintenance worker for the PLCB and asked whether the

store’s electricity and plumbing were in working order or if the

store might otherwise be in need of repairs. The assistant

manager became “very rude” to Patterson, so he exited the

liquor store, entered his “state-owned van, and reported the

assistant manager to his foreman over the phone.” App. 11. Per

his foreman’s instruction, Patterson left the Eddystone store

and drove towards another PLCB store in Newtown Square,

Pennsylvania.

En route to the Newtown Square store, Patterson was

stopped by the police and questioned about “robbing” the

Eddystone store. Id. During the stop, an officer informed

Patterson that the Eddystone assistant manager had called to

report a “black guy” in a “state van” who was trying to “rob

her store.” App. 11-12.

Patterson filed a Complaint against the PLCB alleging

race discrimination and violations of the Fourteenth

Amendment’s Equal Protection Clause, pursuant to 42 U.S.C.

§§ 1981 and 1983. The PLCB filed a motion to dismiss for

failure to state a claim pursuant to Federal Rule of Civil

Procedure 12(b)(6), which the District Court granted upon a

finding that the PLCB was entitled to Eleventh Amendment

sovereign immunity from suit. Patterson appeals, arguing that

the District Court erred in finding that the PLCB was an “arm”

of the Commonwealth of Pennsylvania. Patterson contends

that, in reaching its conclusion that the PLCB is immunized

from suit under the Eleventh Amendment, the District Court

improperly weighed this Court’s three-factor test, established

in Fitchik v. N.J. Transit Rail Operations, Inc., 873 F.2d 655,

659 (3d Cir. 1989) (en banc).

II.

The District Court had jurisdiction pursuant to 28

U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. §

1291. We exercise plenary review over a District Court’s

dismissal of an action pursuant to Rule 12(b)(6). Estate of

Lagano v. Bergen Cty. Prosecutor’s Office, 769 F.3d 850, 853

(3d Cir. 2014). We review de novo whether an entity is entitled

4

to sovereign immunity. Karns v. Shanahan, 879 F.3d 504, 512

(3d Cir. 2018).

III.

Though, by its terms, the Eleventh Amendment

immunizes only “States” against private actions brought by

citizens of other states, see U.S. Const. amend. XI, it is “well

established” that suits brought by in-state litigants against

“arms” of a state “may nonetheless be barred by the Eleventh

Amendment.” Karns, 879 F.3d at 512–13 (quoting Edelman v.

Jordan, 415 U.S. 651, 663 (1974), and Bowers v. Nat’l

Collegiate Athletic Ass’n, 475 F.3d 524, 545 (3d Cir. 2007));

see also Hans v. Louisiana, 134 U.S. 1, 20 (1890).

A party is an “arm of the state” for sovereign immunity

purposes when “the state is the real, substantial party in

interest.” Ford Motor Co. v. Dep’t of Treasury of Ind., 323 U.S.

459, 464 (1945), overruled on other grounds by Lapides v. Bd.

of Regents of Univ. Sys. of Ga., 535 U.S. 613, 623 (2002).

“[T]he relationship between the State and the entity in

question” is critical to this inquiry. Regents of the Univ. of Cal.

v. Doe, 519 U.S. 425, 429 (1997). We employ a three-factor

test to determine an entity’s sovereign immunity status: “(1)

whether the payment of the judgment would come from the

state; (2) what status the entity has under state law; and (3)

what degree of autonomy the entity has.” Karns, 879 F.3d at

513 (quoting Bowers, 475 F.3d at 546). We regard the three

factors as “co-equal.” Benn v. First Judicial Dist. of Pa., 426

F.3d 233, 239–40 (3d Cir. 2005). Thus after assessing in which

direction each factor points, “we balance them to determine

whether an entity amounts to an arm of the State.” Maliandi,

845 F.3d at 84.

Below, we will assess the factors and their relevant

subfactors. Part III.A. considers whether the state or the PLCB

funds payment of an adverse judgment; Part III.B. reviews

whether state law treats the PLCB as an arm of the state; and

Part III.C. examines the PLCB’s autonomy relative to the state.

A.

When analyzing the funding factor, we first ask

“[w]hether the money that would pay the judgment would

5

come from the state.” Fitchik, 873 F.2d at 659. To evaluate this

question, we consider three subfactors: (1) a state’s legal

obligation to pay a money judgment entered against the entity;

(2) whether the agency has money to satisfy the judgment; and

(3) whether there are specific statutory provisions that

immunize the state from liability for money judgments. Id.; see

also Maliandi, 845 F.3d at 86. We evaluate each subfactor in

turn, below.

i.

The first funding subfactor focuses on “whether the

state treasury is legally responsible for the payment of a

judgment.” Febres v. Camden Bd. of Educ., 445 F.3d 227, 233

(3d Cir. 2006) (emphasis added). Accordingly, if a state

indemnifies an entity voluntarily, the funding factor will likely

disfavor granting sovereign immunity. See Maliandi, 845 F.3d

at 87. Pennsylvania is not legally obligated to pay for

judgments entered against the PLCB. After the PLCB pays a

judgment, the Governor may choose to reimburse the PLCB—

but there is no legal obligation to do so. See 47 Pa. Cons. Stat.

§ 744-910 (“The State Treasurer is hereby authorized and

directed to transfer such sums from the General Fund to the

State Stores Fund as the Governor . . . shall direct.”).

Accordingly, this subfactor weighs definitively against

granting the PLCB sovereign immunity.

The PLCB instead argues that this subfactor only

slightly disfavors a finding of sovereign immunity. Appellee’s

Br. 19. Specifically, the PLCB contends that its funds

effectively “morph into Commonwealth funds” because the

funds are subject to a high level of oversight from state

officials. Id. Therefore, an adverse judgment’s practical effect

would constitute a state legal obligation to keep the PLCB

afloat. Id.

We do not agree. Although practical effects arguments

have, on occasion, “enter[ed] [our] calculus,” Febres, 445 F.3d

at 236, such instances have been limited to situations where

“Congress has put a proverbial ‘gun to the head’ of the State to

sustain the entity even without a legal obligation.” Maliandi,

845 F.3d at 87 n.7 (citing Alaska Cargo Transp., Inc. v. Alaska

R.R. Corp., 5 F.3d 378 (9th Cir. 1993) (holding that an adverse

judgment against the state agency had the practical effect of

6

impacting the state’s treasury because federal law effectively

required Alaska to keep the entity operational); Morris v.

Wash. Metro. Area Transit Auth., 781 F.2d 218 (D.C. Cir.

1986) (finding that a judgment against the Washington

Metropolitan Area Transit Authority would directly affect

Maryland and Virginia’s treasuries because of their practical

financial commitments to the entity)).

Here, we find the PLCB’s argument unavailing, as the

state is not legally obligated to pay for an adverse judgment,

and there is no legislative coercion for the state to do so.

Though the practical effects argument is not convincing in

terms of this subfactor, the state’s high level of control over the

PLCB is relevant to the third subfactor—the PLCB’s

autonomy—and, accordingly, we will discuss it below. Fitchik,

873 F.2d at 660 (reasoning that New Jersey’s veto power over

New Jersey Transit’s operations indicated a lack of autonomy

from the state, not financial dependency).

In sum, as the PLCB is responsible for the payment of

judgments, and the state has no legal obligation to indemnify

it, this subfactor points definitively against affording the PLCB

sovereign immunity.

ii.

The second subfactor requires us to determine whether

the entity has money to pay an adverse judgment, and whether

“the entity has sources of funding aside from state

appropriations” that could satisfy the judgment. Maliandi, 845

F.3d at 88; accord Fitchik, 873 F.2d at 660–62. We also

consider the degree of control the state maintains over any

funds it appropriates to the entity. See Fitchik, 873 F.2d at 661.

The PLCB obtains revenue from the sale of liquor,

which is then deposited into the State Stores Fund, a “separate

fund from the State Treasury.” Heppler v. Pa. Liquor Control

Bd., No. 10-3430, 2011 WL 2881221, at *5 (E.D. Pa. July 18,

2011). Money in the State Stores Fund is appropriated by the

Pennsylvania General Assembly to the PLCB for its daily

operations, and for “otherwise administering and enforcing the

Pennsylvania Liquor Control Act.” 47 Pa. Cons. Stat. § 744–

907. This includes the payment of judgments entered against

the PLCB. Heppler, 2011 WL 2881221, at *5 (finding that a

7

“payment of a judgment against the PLCB would be paid out

of the State Stores Fund”). In the event that the PLCB did not

have sufficient funds to satisfy a judgment, it could “obtain

sufficient funds by raising its revenues.” Id.; accord Christy v.

Pa. Turnpike Comm’n, 54 F.3d 1140, 1146–47 (3d Cir. 1995)

(holding that the Pennsylvania Turnpike Commission could

pay for a judgment through its “power to raise revenue levels

by increasing the toll rates”).

Alternatively, if the PLCB was unable to satisfy a

judgment, the state could transfer funds to it as directed by the

Governor; however, the PLCB would be required to reimburse

the state “no[] later than thirty days after the end of such fiscal

year or period.” 47 Pa. Cons. Stat. § 744–911. Funds

appropriated to the PLCB effectively operate as a loan,

indicating that the state exerts some financial control over it.

This control is, however, outweighed by the PLCB’s ability to

satisfy a judgment with its own source of revenue and to raise

additional funds without significant state involvement. This

demonstrates a level of financial independence not

characteristic of an entity considered an arm of the state.

Accordingly, this subfactor tilts away from a finding of

sovereign immunity.

iii.

The third subfactor instructs us to determine whether

the state has immunized itself from the entity’s debts. Fitchik,

873 F.2d at 659. If the state has absolved itself of

responsibility, this suggests that the entity is not considered an

arm of the state. Maliandi, 845 F.3d at 90.

There is no specific provision in the Liquor Code that

immunizes the state from the PLCB’s liabilities. When

assessing this subfactor, the Heppler Court found that the

PLCB is likely expected to pay off its own debts because there

is a provision in the Liquor Code, see 47 Pa. Cons. Stat. § 744-

910, that instructs the PLCB to transfer any surplus revenue to

the state, “indicating solvency beyond its operating budget.”

Heppler, 2011 WL 2881221, at *5. Moreover, any temporary

loans to the PLCB must be repaid within the fiscal year. Id.;

see 47 Pa. Cons. Stat. § 744-911. Thus, this subfactor weighs

slightly against affording immunity.

8

In summary, because the state is not legally responsible

for adverse judgments, the PLCB can satisfy a judgment using

revenue obtained from liquor sales, and the PLCB is

responsible for its own debts, the funding factor weights

definitively against granting the PLCB sovereign immunity.

B.

The second factor requires us to examine whether state

law treats the PLCB as an arm of the state. Fitchik, 873 F.2d at

659. We consider four subfactors: (1) how the law treats the

agency generally; (2) whether the agency is separately

incorporated; (3) whether the agency can sue and be sued in its

own right; (4) and whether it is immune from state taxation. Id.

i.

Pennsylvania statutory and case law indicate that the

PLCB is considered an arm of the state for sovereign immunity

purposes. First, Pennsylvania’s state sovereign immunity

statute grants the PLCB state sovereign immunity except under

specific circumstances. See 42 Pa. Cons. Stat. § 8522(b)(7)

(excepting sovereign immunity for the sale of liquor to “any

minor, or to any person visibly intoxicated, or to any insane

person, or to any person known as an habitual drunkard, or of

known intemperate habit”); see also Heppler, 2011 WL

2881221, at *6 (citing that the “PLCB is an agency which is

entitled to sovereign immunity pursuant to the state sovereign

immunity statute, 42 Pa. Cons. Stat. § 8522(a)”).

Furthermore, Pennsylvania state courts have

consistently found that the PLCB is an arm of the state entitled

to state sovereign immunity. See Merchs.’ Warehouse Co. v.

Gelder, 36 A.2d 444, 448 (Pa. 1944) (“The [PLCB] is an

agency of this Commonwealth created by it for the purpose of

carrying out a state function and for this reason is clothed with

immunity from suit.”); Biello v. Pa. Liquor Control Bd., 301

A.2d 849, 852 (Pa. 1973) (reaffirming the holding in Gelder);

Brey v. Commonwealth, 381 A.2d 228, 229 (Pa. Commw. Ct.

1978).

Finally, in Karns, we considered the extent to which

New Jersey Transit officers are vested with “general authority,

without limitation, to exercise police powers.” Karns, 879 F.3d

9

at 517. We concluded that “New Jersey law regards NJ Transit

as exercising the official police powers of the state.” Id. Here,

the PLCB was created under the Liquor Code as “an exercise

of the police power of the Commonwealth for the protection of

the public welfare, health, peace and morals of the people of

the Commonwealth.” 47 Pa. Cons. Stat. § 1-104(a). This too

supports the view that Pennsylvania law regards the PLCB as

an arm of the state.

Though general treatment under state law is

informative, it is not dispositive; this subfactor “does not

necessarily overshadow the other relevant subfactors.” Cooper

v. Se. Pa. Transp. Auth., 548 F.3d 296, 308 (3d Cir. 2008).

Thus, we note that the PLCB is generally treated as an arm of

the state under state law, and continue our analysis of the

second factor.

ii.

Next, we review the entity’s corporation status. When

an entity is separately incorporated, this weighs against

affording the entity sovereign immunity. Febres, 445 F.3d at

230–31.

The PLCB argues that it does not have a separate

corporate existence because the Liquor Code does not

explicitly state whether the PLCB is separately incorporated.

Appellee’s Br. 20. Patterson argues, however, that the PLCB is

separately incorporated because the Liquor Code defines it as

an “independent administrative board.” Appellant’s Br. 11

(quoting 47 Pa. Cons. Stat. § 2-201).

We have repeatedly held that an entity is separately

incorporated when there is statutory language explicitly stating

the same. See Cooper, 548 F.3d at 307 (citing 74 Pa. Cons.

Stat. § 1711(a)) (finding an entity to be separately incorporated

under its enabling statute, which stated that it has “a separate

corporate existence”); Febres, 445 F.3d at 230 (citing N.J. Stat.

Ann. § 18A:10-1) (considering a New Jersey entity separately

incorporated based on a state statute’s language stating “under

the supervision of a board of education, which shall be a body

corporate”); Fitchik, 873 F.2d at 663 (citing N.J. Stat. Ann. §

27:25-4(a) (creating NJ Transit as “a body corporate and politic

with corporate succession”)).

10

Here, there is no explicit statutory provision stating that

the PLCB is separately incorporated, and Patterson does not

offer any evidence as to why the PLCB being an “independent

agency” is relevant to its incorporation status. Therefore, we

find Patterson’s argument unconvincing, and that this

subfactor favors a finding of sovereign immunity.

iii.

The Liquor Code does not give the PLCB power to sue

or be sued as a separate entity from the Commonwealth, setting

the PLCB apart from many other entities created by

Pennsylvania law. Compare 47 Pa. Cons. Stat. § 2-207

(demonstrating that enumerated powers of the PLCB do not

include ability to sue or be sued); with 4 Pa. Cons. Stat. §

1202(b)(3) (listing capacity to sue or be sued under general

powers of Pennsylvania Gaming Control Board); and 36 Pa.

Cons. Stat. § 652d (powers of Pennsylvania Turnpike

Commission include ability to sue and be sued); and 40 Pa.

Cons. Stat. § 4103 (stating that the Pennsylvania Interstate

Insurance Product Regulation Compact can “bring and

prosecute legal proceedings or actions in its name as the

Commission”). Accordingly, the fact that the Liquor Code

does not state that the PLCB can sue and be sued as its own

agency indicates that PLCB does not have this power.

Patterson argues that the PLCB has the ability to sue and

be sued as its own entity due to the Supreme Court of

Pennsylvania’s holding in Pennsylvania Liquor Control

Board. v. Rapistan, Inc., 371 A.2d 178 (Pa. 1976). Appellant’s

Br. 10-11. This argument is misguided. In Rapistan, the court

stated that the “PLCB could institute an action before [a

Commonwealth Court]. However, [the court] stated that the

suit should be brought by the Commonwealth and not by the

individual agency.” Rapistan, 371 A.2d at 185 n.10. Thus, it is

clear that Rapistan did not permit the PLCB to bring suit as an

individual agency; rather, Rapistan allowed the PLCB to sue

under the name of Commonwealth.

Thus, we find that this subfactor also leans towards a

finding of sovereign immunity.

11

iv.

There is no statutory indication that the PLCB is

immune from state taxation. Compare 47 Pa. Cons. Stat. § 8-

803 (failing to discuss taxation requirements under the general

duties of the PLCB), with 36 Pa. Cons. Stat. § 653(m) (stating

that the Pennsylvania Turnpike Commission “shall not be

required to pay any taxes or assessments on any property

acquired or used by it.”). The PLCB does not, however, pay

taxes on its revenues, property, or bonds, “suggest[ing] that

Pennsylvania state law considers the PLCB an arm of the

state.” Heppler, 2011 WL 2881221, at *7. Thus, this subfactor

factor slightly favors sovereign immunity.

v.

In sum, three of the four subfactors only slightly tilt

toward granting immunity: separate incorporation, power to

sue and be sued, and immunity from state taxes. The remaining

subfactor, consideration of the PLCB as an arm of the state

under Pennsylvania statutory and case law, tips the balance in

favor of granting the PLCB sovereign immunity under the

second factor.

C.

The third factor instructs us to examine the degree to

which an entity is autonomous from the state, while “focusing

on the entity’s governing structure and the oversight and

control exerted by a State’s governor and legislature.”

Maliandi, 845 F.3d at 96 (citing Febres, 445 F.3d at 231–32;

accord Fitchik, 873 F.2d at 663–64).

There are numerous statutory provisions in the Liquor

Code that indicate the PLCB is subject to substantial oversight

from the state. First, the executive and legislative branches

have significant control over the PLCB in terms of the

composition of the Board. See 47 Pa. Cons. Stat. §§ 2-201–

204. For example, the Governor appoints the members of the

Board with consent of the Senate, id. § 2-201; appoints the

chairman of the Board, id. § 2-203; and can appoint a secretary

of the Board, id. § 2-204.

12

Additionally, the state imposes several constraints on

the members of the Board: the Liquor Code proscribes how

long they may serve on the Board, id. § 2-201; denotes how old

Board members must be, id. § 2-202(a); prohibits members

from holding any other office or position while serving on the

Board, id. § 2-202(b); and requires Board members to follow

the State Public Official and Employee Ethics Law, id. § 2-

206.1.

The state also prescribes the general powers of the

Board and specifies how it shall operate, including the general

powers of the Board; id. § 2-207; the types of regulations the

PLCB is permitted to create are predefined by state statute; id.

§ 2-208; and the state directs the PLCB to transfer two percent

of its annual profits from the sale of liquor to the Department

of Health; id. § 8-802(c).

The PLCB does have some autonomy, however, in that

it has the power to grant and revoke liquor licenses, lease

buildings for liquor stores, and make certain regulations that it

deems necessary for the efficient administration of the Liquor

Code. Heppler, 2011 WL 2881221, at *7. Nonetheless, these

powers were ascribed by the state and are still subject to the

Administrative Code. 47 Pa. Cons. Stat. § 2-206.

In sum, the PLCB is subject to substantial oversight

from the state. Therefore, we find that this factor weighs

definitively in favor of finding that the PLCB is an arm of the

state.

D.

We now balance the three factors to determine whether

the PLCB is an arm of the state. Maliandi, 845 F.3d at 84.

Again, it is important to note that “courts should not simply

engage in a formulaic or mechanical counting up of the

factors.” Karns, 879 F.3d at 513–14. Rather, we must assess

“the qualitative strength of each factor in the context of the

circumstances presented.” Id. at 519.

The funding factor strongly weighs against affording

sovereign immunity, as the PLCB has significant financial

independence from the state. The “status under the law” factor,

though less definitive, tips in favor of immunity because

Pennsylvania statutory and case law overwhelmingly views the

13

PLCB as an arm of the state. The autonomy factor weighs

strongly in favor of immunity because the PLCB is subject to

substantial oversight and control from the state’s executive and

legislative branches. On balance, the first and third factors

effectively cancel each other out, as they point in opposite

directions. The PLCB’s status under Pennsylvania law tips the

scale in favor of the PLCB being considered an arm of the state.

We therefore conclude the PLCB is an arm of the state that is

entitled to Eleventh Amendment sovereign immunity.2

* * *

For the foregoing reasons, we will affirm the order of

the District Court granting the PLCB’s motion to dismiss.



2

In so holding, Patterson's claim fails for a separate reason: a

state, including an entity that is an arm of the state, is not a

"person" under 42 U.S.C. § 1983, and therefore cannot be sued

for damages under that statute. See Will v. Michigan Dept. of

State Police, 491 U.S. 58, 64, 70-71 (1989).

Affirmed