Recently, a petition for a writ of certiorari was presented to the U.S. Supreme Court by a Missouri-based student lender seeking review of a decision by the U.S. Court of Appeals for the Tenth Circuit that it does not qualify as an “arm of the state” under the Eleventh Amendment (i.e., establishes state sovereign immunity). This case involved a “public instrumentality” established by the Missouri General Assembly, which performed the “essential public function” of providing access to higher education through financing, purchasing and servicing student loans, and whether such entity was indeed an arm of the state entitled to state sovereign immunity protections.

The petitioner argued the 10th Circuit erred in determining that the entity is not an arm of the state and, therefore, not entitled to state sovereign immunity under the Eleventh Amendment. The petitioners raised two questions: (i) whether a state treasury would be directly liable for any judgment entity’s judgments is the most important factor in determining whether that entity is an arm of the state; and (ii) whether the indicia of an entity’s corporate control, such as its capacity to sue and be sued, own property, and contract, should be relevant to this determination.

The petitioner contended the circuits were divided, with some circuits giving special weight to the state’s liability for judgments, while others did not. The petitioner argued the 10th Circuit’s decision, (i) resting upon whether a state treasury would be directly liable, violates the central purpose of the Eleventh Amendment by failing to protect Missouri’s sovereign power and effectively subjects Missouri’s “public policy and administration of [its] public affairs to the mandates of judicial tribunals without [its] consent, and in favor of individual interests,” and (ii) deprives a sovereign state of prerogative to “allocate power among the branches and instrumentalities of government.” The petitioner seeks the Supreme Court’s review to resolve the circuit splits and clarify the test for determining whether an entity is an arm of the state.