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U.S. 9th Circuit Court of Appeals
USA v BERING STRAIT SCHOOL
9635827
UNITED STATES OF AMERICA EX REL NORTON SOUND HEALTH No. 96-35827 CORPORATION, D.C. No. Plaintiffs-Appellants, CV-94-00247 v. (HRH) BERING STRAIT SCHOOL DISTRICT, OPINION Defendant-Appellee.
Appeal from the United States District Court
for the District of Alaska
H. Russel Holland, Chief Judge, Presiding
Argued and Submitted
November 3, 1997--Seattle, Washington
Filed March 12, 1998
Before: Betty B. Fletcher and Diarmuid F. O'Scannlain,
Circuit Judges, and William W Schwarzer,*
Senior District Judge.
Opinion by Judge Schwarzer;
Dissent by Judge O'Scannlain
SUMMARY
_________________________________________________________________
_________________________________________________________________
COUNSEL
Edward Himmelfarb, Washington, D.C., for the plaintiff-
appellant.
Saul Friedman, Anchorage, Alaska, for the defendant-
appellee.
_________________________________________________________________
OPINION
SCHWARZER, Senior District Judge:
We must decide whether the Bering Strait School District
(the "District"), a local school district created under Alaska
law, is a "State" within the meaning of the Indian Health Care
Improvement Act, 25 U.S.C. S 1621e (the "Act"), for the pur-
pose of qualifying for the exemption from having to make
reimbursement to the federal government for health services
provided to Alaska Natives.
I.
This action was brought by the United States under section
206 of the Act, codified at 25 U.S.C. S 1621e(a) (West Supp.
1997), for reimbursement of the reasonable expenses incurred
by both the United States and Norton Sound Health Corpora-
tion in providing free health care to the District's Alaska
Native employees. The District moved for summary judgment
contending that it is an "arm of the state" and therefore enti-
tled to the exemption under the Act for "any State." A "State"
is required to make reimbursement only for certain medical
services not involved here. See 25 U.S.C.S 1621e(b) (West
Supp. 1997). The district court granted the motion and, after
the United States dismissed the only other claim pending,
entered judgment for the district.1 We have jurisdiction under
28 U.S.C. S 1291 and reverse.
II.
Congress enacted the Indian Health Care Improvement Act,
Pub. L. No. 94-437, 90 Stat. 1400 (1976), having found that
"[f]ederal health services to maintain and improve the health
of the Indians are consonant with and required by the Federal
Government's historical and unique legal relationship with,
and resulting responsibility to, the American Indian people."
25 U.S.C. S 1601(a) (West 1983). Congress declared that "it
is the policy of this Nation, in fulfillment of its special respon-
sibilities and legal obligation to the American Indian people,
to meet the national goal of providing the highest possible
health status to Indians and to provide existing Indian health
services with all resources necessary to effect that policy." Id.
S 1602(a) (West Supp. 1997). The purpose of the Act was to
ensure sufficient resources to provide Indians with proper
health care and adequate funding to construct modern hospi-
tals and other health care facilities. However, in adopting the
Act, "Congress did not view the federal government as the
exclusive provider of Indian health care benefits"; it consid-
ered that to be a "shared responsibility" with the states.
McNabb v. Bowen, 829 F.2d 787, 792 (9th Cir. 1987).
In 1988, recognizing that health care was available to some
Indians through employers who provided health insurance
plans to their employees, Congress added a section 206 to the
Act, giving the United States the right to recover the
"reasonable expenses incurred by the Secretary in providing
health services" to eligible Indians and Alaska Natives. The
United States was authorized to recover from the non-
government provider to the same extent that that provider
would be eligible for reimbursement from the United States
had health care services been provided by the nongovernmen-
tal provider and the individual had been required to pay and
had in fact paid. Indian Health Care Amendments of 1988,
Pub. L. No. 100-713, 102 Stat. 4811 (1988) codified at 25
U.S.C. S 1612e(a).2 As a result, a health insurer is now
required to reimburse the United States for health care pro-
vided by the United States to Indians and Alaska Natives who
were covered by a health insurance plan, just as the United
States would reimburse non-governmental providers, even
though the United States did not itself charge for its services.
Congress preempted all provisions of state and local law, and
all contract provisions, that would "prevent or hinder" recov-
ery of reimbursement. See 25 U.S.C. S 1621e(c). The only
exception was that the right of the United States to recover
from "any State, or any political subdivision of a State" was
limited to treated conditions covered under workers' compen-
sation laws or a no-fault automobile insurance program. 25
U.S.C. S 1621e(b).3
Congress later amended section 206 when it adopted the
Indian Health Amendments of 1992, Pub. L. No. 102-573,
106 Stat. 4551 (1992). The amendment deleted from 25
U.S.C. S 1621e(b) the words "or any political subdivision of
a state." As a result, only an entity qualifying as "any State"
enjoys the exemption from liability for reimbursement under
the Act. The issue before us is whether the District qualifies
as "any State."
III.
The District provides health insurance to its employees,
including Alaska Native employees, through an administered
self-insurance plan. Alaska Natives, however, are also eligible
for comprehensive medical care free of charge provided by
Norton Sound Health Corporation ("Norton") under the
Alaska Tribal Health Compact and Annual Funding Agree-
ment, pursuant to Title III of the Indian Self-Determination
and Education Assistance Act, Pub. L. No. 93-638, as added,
Pub. L. No. 100-472, 102 Stat. 2296 (1988). The United
States brought this action against the District on behalf of
Norton for reimbursement of the reasonable expenses
incurred by both the United States and Norton in providing
free health care to Alaska Native employees of the District.
The District is a Regional Educational Attendance Area
("REAA") located near Nome, Alaska, in the "unorganized
borough."4 By statute an REAA is a school district operated
on an area wide basis under the management and control of
a regional school board. Its members are elected by qualified
voters of the communities served by the REAA. Alaska Stat.
S 14.08.041(a) and (b) (Michie 1997). REAAs have the fol-
lowing powers: sue and be sued; contract for services and
supplies; establish their own fiscal procedures; hire and com-
pensate employees; adopt regulations governing organization,
policies, and procedures for the operation of schools; main-
tain, operate, discontinue and combine schools subject to
approval of the State Department of Education; own land and
buildings used in relation to the schools; and provide rental
housing to teachers. Alaska Stat. S 14.08.101. REAAs do not
have taxing power. The District receives 82 percent of its
income from the state, the balance coming from the federal
government and local sources.
In granting summary judgment for the District, the district
court looked for guidance to Eleventh Amendment case law
while acknowledging, correctly, that the Eleventh Amend-
ment is not at issue. It concluded that because the Alaska leg-
islature oversees and controls REAAs, and provides
substantially all of the money necessary to operate them, the
District is an "arm of the state" and therefore exempt from the
reimbursement requirements of the Act.
[1] The Eleventh Amendment analogy is inapposite. The
issue here is one of statutory interpretation: What did Con-
gress intend when it used the phrase "any State " (not defined
in the Act) to limit the reimbursement obligation? It is
unlikely that it intended the term to be defined in terms of
Eleventh Amendment immunity analysis for several reasons:
first, the Eleventh Amendment does not apply to suits by the
government against states; second, as originally drafted, the
exemption also included "political subdivisions " which enjoy
no Eleventh Amendment immunity, see Hess v. Port Auth.
Trans-Hudson Corp.,
513 U.S. 30, 62
, 115 S. Ct. 394, 411,
130 L. Ed. 2d 245 (1994); third, the states' exemption from
reimbursement liability is only partial; and fourth, there is no
evidence that Congress meant to subordinate its claim for
reimbursement to protection of the "State's purse." Id. at 48,
115 S. Ct. at 404.
[2] The application of the exemption under the Act turns
not on whether an entity is an "arm of the State " but whether
it is a "State." The plain meaning of the word "State" does not
include school district or regional educational attendance area.
See, e.g., Webster's Third New International Dictionary 2228
(16th ed. 1971) ("one of the bodies politic or component units
in a federal system that is more or less independent and sover-
eign over internal affairs but forms with the other units a sov-
ereign nation (the United States of America) . . . a territorial
unit in which the general body of law is separate and distinct
from the law of any other territorial unit"). The District relies
on our decision in Wash. State Dept. of Transp. v. Natural
Gas Co., 59 F.3d 793 (9th Cir. 1995), in which we held that
the Washington State Department of Transportation qualified
as a "State" under the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C.
S 9607. We held that "[t]he organized government of a state
includes state administrative departments and agencies . . .[in-
cluding] `[a] department, commission, board, committee or
body of any form operating as an instrumentality of the state
government.' " 59 F.3d at 800 (quoting Ballentine's Law Dic-
tionary 1210 (3d ed. 1969)). We expressly distinguished,
however, "[a] municipality, a local government with authority
over a limited area, [as] . . . a different type of government
unit than a state-wide agency that is part of the organized gov-
ernment of the state itself." Id. at n.5. In short, a local govern-
ment unit, though established under state law, funded by the
state, and ultimately under state control, with jurisdiction over
only a limited area, is not a "State."
[3] Although federal law controls the interpretation of the
Act, we note that the Alaska Supreme Court has observed that
"[t]he REAA's are not simply successors to the [Alaska State
Operated School System]; they are independent entities which
have been given broad powers to run their individual school
districts as they see fit." Northwest Arctic Reg'l Educ. Atten-
dance Area v. Alaska Public Serv. Employees, Local 71, 591
P.2d 1292, 1298 (Alaska 1979), overruled on other grounds,
Alaska Commercial Fishing & Agric. Bank v. O/S Alaska
Coast, 715 P.2d 707, 709 n.5 (Alaska 1986).5
[4] We therefore conclude that the School District does not
qualify as a "State" under the Act.
The judgment is REVERSED.
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O'SCANNLAIN, Circuit Judge, dissenting.
I would affirm the judgment of the district court. Our
court's decision in Washington State Department of Trans-
portation v. Washington Natural Gas Co., 59 F.3d 793 (9th
Cir. 1995), compels the conclusion that the Bering Strait
School District ("BSSD") is an instrumentality of the "State"
for purposes of the Indian Health Care Improvement Act, 25
U.S.C. S 1601, et seq. BSSD is therefore exempt from having
to reimburse the federal government for health services pro-
vided to its Alaska Native employees. See 25 U.S.C.
S 1621e(b).
As the majority acknowledges, we held in Washington Nat-
ural Gas that "[t]he organized government of a state includes
state administrative departments and agencies. . . .[including]
`[a] department, commission, board, committee, or body of
any form operating as an instrumentality of the state
government.' " 59 F.3d at 800 (quoting Ballentine's Law Dic-
tionary 1210 (3d ed. 1969)). Therefore, under Washington
Natural Gas, the relevant question is whether BSSD is a body
operating as an instrumentality of the Alaskan government.
The majority's principal justification for its conclusion that
BSSD is not an instrumentality of Alaska is that BSSD has
"jurisdiction over only a limited area."1 See Majority Opinion
at 2295. However, our determination as to whether a govern-
ment entity qualifies as an instrumentality of either a state or
the federal government should not turn solely on the geo-
graphical dimension over which the government entity exer-
cises jurisdiction. Is the Ninth Circuit not an instrumentality
of the federal government, notwithstanding the fact that it
comprises only 9 of the 50 states?
Instead of focusing on geography, our inquiry as to whether
a government entity qualifies as a state agency should focus,
as Washington Natural Gas suggests, on the amount of con-
trol the state wields over that entity. Alaska exercises a high
degree of control over BSSD, which is located in its only
unorganized borough. The Alaskan Constitution provides:
The legislature shall provide for the performance
of services it deems necessary or advisable in unor-
ganized boroughs, allowing for maximum local par-
ticipation and responsibility. It may exercise any
power or function in an unorganized borough which
the assembly may exercise in an organized borough.
Alaska Const. art. X, S 6.
In Alaska's organized boroughs, the borough assembly pro-
vides the money necessary to operate the school districts. See
AS 14.12.020(c). However, in the unorganized borough, the
state legislature is required to "provide the state money neces-
sary to maintain and operate" the schools. Id. Furthermore,
because BSSD is not an organized borough or a city, it does
not have the power to tax. See Alaska Const. art. X, S 2 ("The
State may delegate taxing powers to organized boroughs and
cities only."). BSSD therefore receives 82% of its income
from the state.2 Consequently, Alaska would ultimately shoul-
der the brunt of any judgment entered against BSSD.
Our decision in Alaska v. Chevron Chemical Co., 669 F.2d
1299 (9th Cir. 1982), supports the view that the BSSD is an
instrumentality of the state of Alaska. In Chevron, we held
that the University of Alaska is "a state department or agency
that enjoys co-equal status with the executive branch." Id. at
1303 n.6. We reached this conclusion despite the fact that the
University of Alaska is a corporate entity, has the power to
sue and be sued, "independently fixes the salaries of its
employees, controls and manages its own real estate, personal
property, and money, has independent discretion to invest any
and all funds or property, and may lease or sell federal land
grants without the approval of the State legislature or
executive."3 Id. at 1303-04 (Wallace, J., dissenting).
In light of these considerations, I believe that Alaska exer-
cises sufficient control over BSSD to compel the conclusion
that BSSD is a "state agency" as that term was defined by our
court in Washington Natural Gas. Consequently, I disagree
with the majority's holding that BSSD is not exempt under
the Indian Health Care Improvement Act from having to
reimburse the federal government for health services provided
to its Alaska Native employees.
I respectfully dissent. the end
_______________________________________________________________
FOOTNOTES
*Honorable William W Schwarzer, Senior United States District Judge
for the Northern District of California, sitting by designation.
1 The parties have stipulated that the first claim dismissed without preju-
dice will never be pursued in any federal court.
2 Section 1621e(a) provides in relevant part:
[T]he United States . . . shall have the right to recover the reason-
able expenses incurred by the Secretary . . . in providing health
services . . . to any individual to the same extent that such indi-
vidual, or any nongovernmental provider of such services, would
be eligible to receive reimbursement . . . if (1) such service had
been provided by a nongovernmental provider, and (2) such indi-
vidual had been required to pay such expenses and did pay such
expenses.
25 U.S.C. S 1621e(a).
3 Section 1621e(b) provides in relevant part:
Subsection (a) of this section shall provide a right of recovery
against any State only if the injury, illness, or disability for which
health services were provided is covered under (1) workers' com-
pensation laws, or (2) a no-fault automobile accident insurance
program.
25 U.S.C. S 1621e(b) (emphasis added).
4 The Constitution of the State of Alaska divides the state into organized
boroughs and the "unorganized borough." See Alaska Const. art. X, S 3.
The "unorganized borough" is the area of the state outside organized bor-
oughs. See Alaska Stat. S 29.03.010 (Michie 1997).
5 The dissent cites Alaska v. Chevron Chemical Co., 669 F.2d 1299 (9th
Cir. 1982), in which we held that Alaska courts would categorize the Uni-
versity of Alaska as a state agency for purposes of permitting the state
Attorney General to bring an antitrust action on its behalf. We relied on
University of Alaska v. National Aircraft Leas. Ltd. , 536 P.2d 121 (Alaska
1975), in which the Alaska Supreme Court drew a distinction between the
University and educational institutions created to meet the needs of local
areas:
In its constitutional status it stands as the single governmental
entity which was specifically created by the people to meet the
statewide need for a public institution of higher education. In this
light, the University must be regarded as uniquely an instrumen-
tality of the state itself. Unlike other public educational institu-
tions created to meet the needs of local areas, it exists
constitutionally to act for the benefit of the state and public gen-
erally.
Id. 124-25.
1 In Washington Natural Gas, we stated that "[a] municipality, a local
government with authority over a limited area, is a different type of gov-
ernment than a state-wide agency that is part of the organized government
of the state itself." Id. at 800 n.5. Although it follows from this statement
that a municipality is not a state agency, it assuredly does not follow that
all government entities "with authority over a limited area" are not state
agencies. Id.
2 Of the remaining 18%, 13% comes from the federal government, while
only 5% comes from local sources.
3 In contrast to the University of Alaska, the BSSD is not a corporate
entity and does not hold title to any real property.
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