Appeal from the United States District Courtfor the District of AlaskaH. Russel Holland, Chief Judge, PresidingArgued and SubmittedNovember 3, 1997--Seattle, WashingtonFiled March 12, 1998Before: 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'ScannlainSUMMARY
______________________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 Alaskalaw, is a "State" within the meaning of the Indian Health CareImprovement Act, 25 U.S.C. S 1621e (the "Act"), for the pur-pose of qualifying for the exemption from having to makereimbursement to the federal government for health servicesprovided to Alaska Natives.I.This action was brought by the United States under section206 of the Act, codified at 25 U.S.C. S 1621e(a) (West Supp.1997), for reimbursement of the reasonable expenses incurredby both the United States and Norton Sound Health Corpora-tion in providing free health care to the District's AlaskaNative employees. The District moved for summary judgmentcontending 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 medicalservices not involved here. See 25 U.S.C.S 1621e(b) (WestSupp. 1997). The district court granted the motion and, afterthe United States dismissed the only other claim pending,entered judgment for the district.1 We have jurisdiction under28 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 healthof the Indians are consonant with and required by the FederalGovernment'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 "itis 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 possiblehealth status to Indians and to provide existing Indian healthservices with all resources necessary to effect that policy." Id.S 1602(a) (West Supp. 1997). The purpose of the Act was toensure sufficient resources to provide Indians with properhealth care and adequate funding to construct modern hospi-tals and other health care facilities. However, in adopting theAct, "Congress did not view the federal government as theexclusive 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 someIndians through employers who provided health insuranceplans to their employees, Congress added a section 206 to theAct, giving the United States the right to recover the"reasonable expenses incurred by the Secretary in providinghealth services" to eligible Indians and Alaska Natives. TheUnited States was authorized to recover from the non-government provider to the same extent that that providerwould be eligible for reimbursement from the United Stateshad health care services been provided by the nongovernmen-tal provider and the individual had been required to pay andhad in fact paid. Indian Health Care Amendments of 1988,Pub. L. No. 100-713, 102 Stat. 4811 (1988) codified at 25U.S.C. S 1612e(a).2 As a result, a health insurer is nowrequired to reimburse the United States for health care pro-vided by the United States to Indians and Alaska Natives whowere covered by a health insurance plan, just as the UnitedStates would reimburse non-governmental providers, eventhough the United States did not itself charge for its services.Congress preempted all provisions of state and local law, andall contract provisions, that would "prevent or hinder" recov-ery of reimbursement. See 25 U.S.C. S 1621e(c). The onlyexception was that the right of the United States to recoverfrom "any State, or any political subdivision of a State" waslimited to treated conditions covered under workers' compen-sation laws or a no-fault automobile insurance program. 25U.S.C. S 1621e(b).3Congress later amended section 206 when it adopted theIndian Health Amendments of 1992, Pub. L. No. 102-573,106 Stat. 4551 (1992). The amendment deleted from 25U.S.C. S 1621e(b) the words "or any political subdivision ofa state." As a result, only an entity qualifying as "any State"enjoys the exemption from liability for reimbursement underthe Act. The issue before us is whether the District qualifiesas "any State."III.The District provides health insurance to its employees,including Alaska Native employees, through an administeredself-insurance plan. Alaska Natives, however, are also eligiblefor comprehensive medical care free of charge provided byNorton Sound Health Corporation ("Norton") under theAlaska Tribal Health Compact and Annual Funding Agree-ment, pursuant to Title III of the Indian Self-Determinationand Education Assistance Act, Pub. L. No. 93-638, as added,Pub. L. No. 100-472, 102 Stat. 2296 (1988). The UnitedStates brought this action against the District on behalf ofNorton for reimbursement of the reasonable expensesincurred by both the United States and Norton in providingfree health care to Alaska Native employees of the District.The District is a Regional Educational Attendance Area("REAA") located near Nome, Alaska, in the "unorganizedborough."4 By statute an REAA is a school district operatedon an area wide basis under the management and control ofa regional school board. Its members are elected by qualifiedvoters 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 andsupplies; 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 toapproval of the State Department of Education; own land andbuildings used in relation to the schools; and provide rentalhousing to teachers. Alaska Stat. S 14.08.101. REAAs do nothave taxing power. The District receives 82 percent of itsincome from the state, the balance coming from the federalgovernment and local sources.In granting summary judgment for the District, the districtcourt looked for guidance to Eleventh Amendment case lawwhile acknowledging, correctly, that the Eleventh Amend-ment is not at issue. It concluded that because the Alaska leg-islature oversees and controls REAAs, and providessubstantially all of the money necessary to operate them, theDistrict is an "arm of the state" and therefore exempt from thereimbursement requirements of the Act.[1] The Eleventh Amendment analogy is inapposite. Theissue here is one of statutory interpretation: What did Con-gress intend when it used the phrase "any State " (not definedin the Act) to limit the reimbursement obligation? It isunlikely that it intended the term to be defined in terms ofEleventh Amendment immunity analysis for several reasons:first, the Eleventh Amendment does not apply to suits by thegovernment against states; second, as originally drafted, theexemption also included "political subdivisions " which enjoyno 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 fromreimbursement liability is only partial; and fourth, there is noevidence that Congress meant to subordinate its claim forreimbursement to protection of the "State's purse." Id. at 48,115 S. Ct. at 404.[2] The application of the exemption under the Act turnsnot on whether an entity is an "arm of the State " but whetherit is a "State." The plain meaning of the word "State" does notinclude 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 unitsin 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 territorialunit in which the general body of law is separate and distinctfrom the law of any other territorial unit"). The District relieson our decision in Wash. State Dept. of Transp. v. NaturalGas Co., 59 F.3d 793 (9th Cir. 1995), in which we held thatthe Washington State Department of Transportation qualifiedas a "State" under the Comprehensive EnvironmentalResponse, Compensation, and Liability Act, 42 U.S.C.S 9607. We held that "[t]he organized government of a stateincludes state administrative departments and agencies . . .[in-cluding] `[a] department, commission, board, committee orbody of any form operating as an instrumentality of the stategovernment.' " 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 authorityover a limited area, [as] . . . a different type of governmentunit 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 thestate, and ultimately under state control, with jurisdiction overonly a limited area, is not a "State."[3] Although federal law controls the interpretation of theAct, we note that the Alaska Supreme Court has observed that"[t]he REAA's are not simply successors to the [Alaska StateOperated School System]; they are independent entities whichhave been given broad powers to run their individual schooldistricts as they see fit." Northwest Arctic Reg'l Educ. Atten-dance Area v. Alaska Public Serv. Employees, Local 71, 591P.2d 1292, 1298 (Alaska 1979), overruled on other grounds,Alaska Commercial Fishing & Agric. Bank v. O/S AlaskaCoast, 715 P.2d 707, 709 n.5 (Alaska 1986).5[4] We therefore conclude that the School District does notqualify as a "State" under the Act.The judgment is REVERSED.
_____________________________O'SCANNLAIN, Circuit Judge, dissenting.I would affirm the judgment of the district court. Ourcourt's decision in Washington State Department of Trans-portation v. Washington Natural Gas Co., 59 F.3d 793 (9thCir. 1995), compels the conclusion that the Bering StraitSchool District ("BSSD") is an instrumentality of the "State"for purposes of the Indian Health Care Improvement Act, 25U.S.C. S 1601, et seq. BSSD is therefore exempt from havingto 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 includesstate administrative departments and agencies. . . .[including]`[a] department, commission, board, committee, or body ofany form operating as an instrumentality of the stategovernment.' " 59 F.3d at 800 (quoting Ballentine's Law Dic-tionary 1210 (3d ed. 1969)). Therefore, under WashingtonNatural Gas, the relevant question is whether BSSD is a bodyoperating as an instrumentality of the Alaskan government.The majority's principal justification for its conclusion thatBSSD is not an instrumentality of Alaska is that BSSD has"jurisdiction over only a limited area."1 See Majority Opinionat 2295. However, our determination as to whether a govern-ment entity qualifies as an instrumentality of either a state orthe 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 instrumentalityof the federal government, notwithstanding the fact that itcomprises only 9 of the 50 states?Instead of focusing on geography, our inquiry as to whethera 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 highdegree of control over BSSD, which is located in its onlyunorganized 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. SeeAS 14.12.020(c). However, in the unorganized borough, thestate 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 doesnot have the power to tax. See Alaska Const. art. X, S 2 ("TheState may delegate taxing powers to organized boroughs andcities only."). BSSD therefore receives 82% of its incomefrom 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.2d1299 (9th Cir. 1982), supports the view that the BSSD is aninstrumentality of the state of Alaska. In Chevron, we heldthat the University of Alaska is "a state department or agencythat enjoys co-equal status with the executive branch." Id. at1303 n.6. We reached this conclusion despite the fact that theUniversity of Alaska is a corporate entity, has the power tosue and be sued, "independently fixes the salaries of itsemployees, controls and manages its own real estate, personalproperty, and money, has independent discretion to invest anyand all funds or property, and may lease or sell federal landgrants without the approval of the State legislature orexecutive."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 conclusionthat BSSD is a "state agency" as that term was defined by ourcourt in Washington Natural Gas. Consequently, I disagreewith the majority's holding that BSSD is not exempt underthe Indian Health Care Improvement Act from having toreimburse the federal government for health services providedto its Alaska Native employees.I respectfully dissent. the end
___________________________FOOTNOTES *Honorable William W Schwarzer, Senior United States District Judgefor 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 organizedboroughs 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 (9thCir. 1982), in which we held that Alaska courts would categorize the Uni-versity of Alaska as a state agency for purposes of permitting the stateAttorney General to bring an antitrust action on its behalf. We relied onUniversity of Alaska v. National Aircraft Leas. Ltd. , 536 P.2d 121 (Alaska1975), in which the Alaska Supreme Court drew a distinction between theUniversity and educational institutions created to meet the needs of localareas: 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 localgovernment with authority over a limited area, is a different type of gov-ernment than a state-wide agency that is part of the organized governmentof the state itself." Id. at 800 n.5. Although it follows from this statementthat a municipality is not a state agency, it assuredly does not follow thatall government entities "with authority over a limited area" are not stateagencies. Id.2 Of the remaining 18%, 13% comes from the federal government, whileonly 5% comes from local sources.3 In contrast to the University of Alaska, the BSSD is not a corporateentity and does not hold title to any real property.