Southwest Virginia utility not entitled to immunity

Although the Virginia General Assembly created BVU Authority, or BVUA, to provide various utility services to residents in three localities in Virginia, and the Commonwealth exercises control by dictating who sits on its board and limits certain of the board’s powers, the BVUA isn’t entitled to Eleventh Amendment immunity as an arm of the state.

Background

James Wood asserts federal and state law claims against BVUA, including two counts brought pursuant to the self-care provision of the Family Medical Leave Act. BVUA has moved to dismiss these counts for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), contending that it is entitled to Eleventh Amendment immunity. Following discovery on this issue, the parties have provided supplemental briefing.

State coffers

The most important factor is whether a judgment against the entity would be paid from the state’s treasury. If a state would cover a substantial portion of the judgment against an entity, then the governmental entity is entitled to Eleventh Amendment immunity.

The Virginia General Assembly created BVUA to provide various utility services to residents in three localities in Virginia and one in Tennessee. BVUA has elected to participate in a self-insurance program that is not administered by the state. It does not receive a line-item appropriation from the state legislature. BVUA charges rates and fees for its services to fund its operating expenses. The parties agree, and I so find, that BVUA, not the commonwealth’s treasury, would pay a judgment against BVUA. Although this factor is accorded significant weight, the inquiry does not end here.

Relationship

If an entity is so closely related to a state that a suit against it would offend the state’s dignity as a sovereign, then allowing the suit to proceed would run afoul of the Eleventh Amendment. To determine the relationship between the entity and the state, the Fourth Circuit has considered three factors: (1) the degree of the control the state exercises over the entity; (2) whether the entity’s scope of interest is statewide or local and (3) how the state law treats the entity.

BVUA is largely autonomous from the commonwealth. Its board appoints its president, the president makes all personnel decisions and establishes personnel rules. BVUA can sue and be sued in its own capacity. It is not represented by the Attorney General of Virginia in litigation matters and has authority to transfer assets, to contract and to create its own operating and capital budgets. While the commonwealth exercises control by dictating who sits on its board and limits certain of the board’s powers, these restrictions on its autonomy are minor in comparison to BVUA’s abilities to govern itself, set its own budget and litigate separately from state control.

While theoretically BVUA could have a statewide interest, the legislature has limited its scope to a region that includes certain counties in Virginia and one county in Tennessee. BVUA is involved primarily with local and out-of-state concerns because its jurisdiction is limited to certain localities in and out of the commonwealth and the benefit of its operation inures to the residents of those areas.

The Supreme Court of Virginia has not addressed whether BVUA’s relationship with the commonwealth is close enough to entitle it to receive Eleventh Amendment immunity. The Virginia Code proclaims, “No provisions of this chapter nor act of an authority, including the procurement of insurance or self-insurance, shall be deemed a waiver of any sovereign immunity to which the Authority or its directors, officers, employees, or agents are otherwise entitled.”

But that proclamation alone does not create an entitlement to immunity. As previously discussed, the Virginia Code reflects that the commonwealth exercises limited control over BVUA. The General Assembly reaffirmed its intent to not limit or restrict “any powers that the Authority might otherwise have under any laws of the Commonwealth.”

Defendant’s motion to dismiss denied.

Wood v. Bristol Virginia Utility Authority, Case No. 1:22-cv-00018, Feb. 10, 2023. WDVA at Abingdon (Jones). VLW 023-3-053. 8 pp.