Dec. 21, 2021 – Sovereign immunity does not bar a lawsuit filed by environmental groups against the Wisconsin Public Services Commission (PSC) and two of its commissioners, the U.S. Court of Appeals for Seventh Circuit has ruled.

However, because the groups filed parallel lawsuits in state court, the federal suit will be stayed pending the disposition of the state suits. 

The groups filed the federal suit in December 2019. The lawsuit came three months after the PSC issued a permit authorizing two companies and a co-op to erect and operate a 100-mile, $500 million power line across southwestern and south central Wisconsin.

In Driftless Area Land Conservancy v. Valcq, 16 F.4^th 508 (7^th Cir. 2021), a three-judge panel held that while the suit fits within an exception to the Eleventh Amendment, which bars lawsuits against suits against state officials, notions of judicial economy warrant abstaining from ruling on the suit’s merits. 

Conflict of Interest?

In their complaint filed in U.S. District Court for the Western District of Wisconsin, the plaintiffs named as defendants the PSC and Commissioners Michael Huebsch, Ellen Nowak, and Rebecca Cameraon Valcq in their official capacities. The plaintiffs alleged that two of the three commissioners had conflicts of interest and should have recused themselves from the permitting decision.

The commissioners’ failure to do so, the plaintiffs alleged, violated their due process rights under 42 U.S.C. section 1983. The plaintiffs asked the court to vacate the permit or enjoin the enforcement of the permit. 

The defendants asked the court to dismiss the case on grounds of sovereign immunity. They also asked the court to abstain from exercising federal jurisdiction until the resolution of state lawsuits filed by the plaintiffs. In those lawsuits, the plaintiffs sought judicial review of the PSC’s permitting process.

Judge Narrows Scope

In November 2020, the district court judge declined to dismiss the suit against Huebsch and Valcq, reasoning that the exception to sovereign immunity created by the U.S. Supreme Court in Ex Parte Young, 209 U.S. 123 (1908) applied. Under Ex Parte Young, plaintiffs may sue to enjoin ongoing constitutional violations by state officials, despite the Eleventh Amendment.  

The judge declined to stay the case based on the abstention doctrine, because he concluded that the state lawsuits did not raise federal constitutional claims.

‘Less delicately called a fiction’

In an opinion written by Chief Judge Diane S. Sykes, the appellate panel upheld the district court’s decision to allow the suit to continue against Huebsch and Valcq. But the panel reversed the court’s non-abstention decision.

The exception created in Ex Parte Young, Sykes wrote, exists to prevent state officials from hiding behind the Eleventh Amendment to violate a plaintiff’s federal rights.

“‘It rests on the premise – less delicately called a fiction – that when a federal court commands a state official to do nothing more than refrain from violating federal law, he is not the State for sovereign immunity purposes,’” wrote Sykes, quoting from Ex Parte Young. 

The Ex Parte Young exception applies only where a plaintiff is seeking prospective relief against an ongoing violation of federal law. The plaintiffs met that criteria, Sykes wrote, because they had requested an injunction against enforcement of the permit.

The commissioners argued that if the plaintiffs’ suit was allowed to proceed, numerous decisions of state agencies would be subject to federal claims of agency bias.

The appellate panel recognized those concerns. But it decided to address them by applying the abstention doctrine.

‘A Collision of Conflicting Rulings’

In applying the abstention doctrine, the appellate panel relied upon Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).

Under that case, a federal court may, in deference to parallel state proceedings, abstain and stay or dismiss a lawsuit where doing so would promote sound judicial administration.

The appellate panel held that the state lawsuits filed by plaintiffs were parallel to the federal lawsuit, because substantially the same parties were litigating substantially the same issue in state court. Plaintiffs’ claims about the commissioners’ failure to recuse themselves involved identical parties, facts, and issues, Judge Sykes wrote, and will be resolved by an examination of largely the same evidence.

And, Sykes wrote, abstention would promote wise judicial administration. For one thing, allowing parallel proceedings would be “costly, disruptive, and run the risk of a collision of conflicting rulings,” because given the prominence of the due process claims, the state and federal lawsuits were almost identical.

‘Two Bites at the Apple’

Besides, state courts often apply federal constitutional standards, Judge Sykes wrote. Sykes, a former Wisconsin Supreme Court justice, wrote that Wisconsin courts have a history of applying federal due process standards to claims that state agency officials should have recused themselves.

“So there is nothing about this particular legal context that cautions against abstention,” Sykes wrote. “To the contrary, it appears that Driftless simply wants two bites at the apple. And that weighs heavily in favor of abstention.”

Moreover, state court proceedings were well advanced, Sykes wrote. A Dane County judge had ruled against the plaintiffs regarding their allegations against Valcq. And the case against Huebsch had made its way to Wisconsin Supreme Court, where the petition for review raised the due process issue.

“Under these circumstances, the use of federal judicial resources to decide the same question cannot be justified,” Sykes wrote.

No Federal Interest

Federalism concerns were another factor in the decision.

“Only the state courts can review the agency’s work for compliance with the procedural and substantive requirements of state law,” Judge Sykes wrote.

“And the state courts alone have the authority to vacate the permit and order the Commission to conduct a new hearing – whether as a remedy for a violation of state law or as a remedy for a violation of the federal constitutional guarantee of due process.”

There was no significant federal interest at stake in the state agency proceedings that required federal review of those proceedings, Sykes wrote. Under Seventh Circuit precedent, states should be allowed to make their own decisions on federal and state issues absent a compelling need for federal intervention.