USCA4 Appeal: 22-2075 Doc: 38 Filed: 06/11/2024 Pg: 1 of 17

PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 22-2075

ANGELA SINGLETON,

Plaintiff - Appellant,

v.

MARYLAND TECHNOLOGY AND DEVELOPMENT CORPORATION,

Defendant - Appellee.

Appeal from the United States District Court for the District of Maryland, at Baltimore. J. Mark Coulson, Magistrate Judge (1:22-cv-00999-JMC)

Argued: January 23, 2024 Decided: June 11, 2024

Before DIAZ, Chief Judge, and NIEMEYER and RICHARDSON, Circuit Judges.

Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Chief Judge Diaz and Judge Richardson joined.

ARGUED: Thomas James Eiler, ZIPIN, AMSTER & GREENBERG, LLC, Silver Spring, Maryland, for Appellant. Joshua Ryan Chazen, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland, for Appellee. ON BRIEF: Philip B. Zipin, ZIPIN, AMSTER & GREENBERG, LLC, Silver Spring, Maryland, for Appellant. Anthony G. Brown, Attorney General, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland, for Appellee. USCA4 Appeal: 22-2075 Doc: 38 Filed: 06/11/2024 Pg: 2 of 17

NIEMEYER, Circuit Judge:

The issue presented in this appeal is whether the Maryland Technology

Development Corporation (“TEDCO”), an entity created by the State to promote economic

development in Maryland, qualifies as an “arm of the State” such that it is immune under

the Eleventh Amendment from suits brought in federal court. Angela Singleton, a former

employee of TEDCO, commenced this action against TEDCO for sex- and race-based

discrimination and retaliation, but the district court granted TEDCO’s motion to dismiss

her complaint, concluding that TEDCO was indeed an arm of the State and therefore

entitled to Eleventh Amendment immunity.

For the reasons that follow, we affirm.

I

TEDCO is a corporation created by the Maryland General Assembly for the purpose

of fostering the growth of new business in Maryland, ultimately for the benefit of its

economy and the people of the State. The enabling statute provides that TEDCO “is a body

politic and corporate” and that it “is an instrumentality of the State.”

(b). In particular, the General Assembly created TEDCO to:

(1) assist in transferring to the private sector the results and products of scientific research and development conducted by colleges, universities, and federal research institutions in the State;

(2) assist in commercializing those results and products;

(3) assist in commercializing technology developed in the private sector;

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(4) foster the commercialization of research and development conducted by colleges, universities, and the private sector to create and sustain businesses throughout all regions of the State;

(5) generally assist early-stage and start-up businesses in the State;

(6) invest in Maryland-based technology companies and promote the commercialization and growth of technology companies and jobs in the State;

(7) build a long-term entrepreneurial capacity and sustained venture capital presence in the State;

(8) create pathways to follow-on financing in the State; and

(9) foster inclusive and diverse entrepreneurship and innovation throughout the State, which may include initiatives to raise awareness of programs to assist small, minority, and women-owned businesses through marketing and other efforts.

§ 10-402(c). The enabling statute directs TEDCO to fulfill these purposes through the

administration of more than a dozen funds and programs created by state law. They

include: (1) the Maryland Technology Incubator Program, id. §§ 10-418 to -426; (2) the

Maryland Stem Cell Research Fund, id. § 10-434; (3) the Coordinating Emerging

Nanobiotechnology Research in Maryland Program and Fund, id. §§ 10-447 to -448; (4)

the Maryland Innovation Initiative Fund, id. § 10-457; (5) the Cybersecurity Investment

Fund, id. § 10-464; (6) the Enterprise Fund, id. § 10-469; (7) the Maryland Small Business

Innovation Research and Technology Transfer Incentive Program and Matching Fund, id.

§§ 10-474, 10-477; (8) the Inclusion Fund, id. § 10-482; (9) the Pre-Seed Builder Fund, id.

§ 10-486; (10) the Maryland Equity Investment Fund, id. § 10-487; (11) the Equitech

Growth Fund, id. § 10-488; (12) the Cyber Maryland Program and Fund, id. § 10-496; (13)

the Invest Maryland Program, id. § 10-4A-01; (14) the Maryland Small Business

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Innovation Research Technical Assistance Program, id. § 10-4B-01; (15) the Maryland

Makerspace Initiative Program and Fund, id. §§ 10-4C-02, 10-4C-05; and (16) the Human-

Relevant Research Fund and Program, id. §§ 10-4D-02 to -03.

To administer these funds, the enabling statute authorizes TEDCO to function much

like a private corporation, but with specified restrictions and designated purposes. See

to -410. Thus, it can award grants or otherwise invest

in qualifying entities that will foster development of businesses in support of each fund’s

specified mission. Similarly, in addition to the money it receives from the State, its various

funds are entitled to receive monetary support from other sources, providing them with

additional funds to further their missions. But annually, TEDCO needs and receives

appropriations from the State. For fiscal year 2021, for example, the State allocated a total

of close to $27 million to TEDCO. And although most of those appropriations were

directed for use by the statutorily created funds, approximately $2.3 million was used for

TEDCO’s operations, including the salaries and wages of its employees.

The Maryland State Treasurer holds each of TEDCO’s funds and is directed to

invest the money in the funds in the same manner as other state money may be invested.

See, e.g.,

(g)(1), 10-448(f)(1). And subject to a few

exceptions, the investment earnings of each fund must be credited back to that fund, each

of which was created for a particular state purpose. TEDCO’s income “is exempt from

State and local taxes.”

§ 10-413. While the statute provides that “[a] debt, claim,

obligation, or liability” of TEDCO is not the State’s, id. § 10-411, TEDCO’s finances are

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nonetheless “subject to audit . . . at any time by the State,” id. § 10-414, and the Maryland

State Comptroller must account for TEDCO’s funds.

TEDCO is managed by a board of directors consisting of 19 members, 14 of whom

are “appointed by the Governor with the advice and consent of the Senate.”

(b). Two are appointed by the Senate President, two are

appointed by the House Speaker, and one is either the Maryland Secretary of Commerce

or the Secretary’s designee.

The Attorney General of Maryland is designated as the

legal advisor to TEDCO, and TEDCO may not hire any additional lawyers except with the

Attorney General’s approval. See

§ 10-405. While TEDCO’s employees are not

considered to be state employees, see id. § 10-407(d) (providing that “[t]he officers and

employees of the Corporation are not subject to the provisions of Division I of the State

Personnel and Pensions Article that govern the State Personnel Management System”), its

employees are nonetheless subject to the Public Ethics Law, id. § 10-407(c).

Finally, TEDCO is required to file a report with the Governor of Maryland and the

Maryland General Assembly every year, which must include “a complete operating and

financial statement covering [its] operations”; “a summary of [its] activities during the

preceding fiscal year”; and “information on all salaries and any incentives approved by the

Board for [TEDCO] employees.”

(a).

II

Angela Singleton commenced this action against TEDCO in federal district court,

alleging that during eight years of employment with TEDCO, she was subjected to sex-

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and race-based discrimination and retaliation. She alleged in five counts (1) a claim for

racial discrimination under

; (2) a claim for retaliation under § 1981; (3)

a sex- and race-based discrimination claim under the Maryland Fair Employment Practices

Act (“MFEPA”); (4) a claim for retaliation under the MFEPA; and (5) a claim for

defamation under Maryland law. For relief, she sought compensatory and punitive

damages, as well as attorneys fees.

TEDCO filed a motion to dismiss the action for a lack of jurisdiction, contending

that it is a state agency entitled to Eleventh Amendment immunity. Alternatively, it argued

that Singleton’s § 1981 and defamation claims should be dismissed for failure to state a

claim for which relief can be granted and that the court should decline to exercise

supplemental jurisdiction over the remaining MFEPA claims.

In opposing the motion to dismiss on immunity grounds, Singleton argued, among

other things, that TEDCO had “failed to prove that it qualifie[d] as an arm of the State”

and that it was instead “essential[ly] a series of social impact and venture funds that are

overseen by [the] [C]orporation.”

In a memorandum opinion dated September 8, 2022, the district court dismissed

Singleton’s action for a lack of jurisdiction based on Eleventh Amendment immunity.

Considering the four factors identified as relevant to determining whether an entity is

entitled to Eleventh Amendment immunity, see Ram Ditta v. Md. Nat’l Cap. Park & Plan.

Comm’n,

, 457–58 (4th Cir. 1987), the court concluded that each weighed in

favor of finding that TEDCO was an arm of the State for purposes of Eleventh Amendment

immunity. In particular, while recognizing that Maryland would not be legally liable for a

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judgment against TEDCO, the court concluded that “the State would be functionally

liable,” because the State provides TEDCO’s annual operating budget. (Emphasis added).

In addition, the court concluded that the “level of control and monitoring” exercised by

Maryland over TEDCO also “warrant[ed] arm-of-the-[S]tate status.” Accordingly, the

court dismissed Singleton’s action without prejudice.

Shortly thereafter, Singleton commenced a new civil action in the district court

against three employees of TEDCO in their individual capacities and that action remains

pending before the district court. Then, from the district court’s judgment dismissing this

action, Singleton filed this appeal, challenging the court’s conclusion that TEDCO is an

arm of the State entitled to Eleventh Amendment immunity.

III

The Eleventh Amendment provides, “The Judicial power of the United States shall

not be construed to extend to any suit in law or equity, commenced or prosecuted against

one of the United States by Citizens of another State, or by Citizens or Subjects of any

Foreign State.” U.S. Const. amend. XI. Despite the Amendment’s language, the Supreme

Court has recognized that the Amendment nonetheless confirms a broader concept of state

sovereignty, such that the Eleventh Amendment must be understood to mean that a State

is not amenable to the suit of any individual in federal court without the State’s consent.

See Seminole Tribe of Florida v. Florida,

(1996). As the Court has

explained, “For over a century we have reaffirmed that federal jurisdiction over suits

against unconsenting States ‘was not contemplated by the Constitution when establishing

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the judicial power of the United States.’”

(quoting Hans v. Louisiana,

(1890)). And it is well settled that Eleventh Amendment immunity also “extends to state

agencies and other governmental entities that can be viewed as ‘arms of the State.’” Md.

Stadium Auth. v. Ellerbe Becket, Inc.,

, 260–61 n.8 (4th Cir. 2005) (cleaned

up); see also P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc.,

(1993) (“[A] State and its ‘arms’ are, in effect, immune from suit in federal court”).

Entities are considered “arms of the State” if they, based on their particular legal

and factual circumstances, “function[] as an arm of the State or its alter ego.” S.C. Dep’t

of Disabilities & Special Needs v. Hoover Universal, Inc.,

(4th Cir.

2008) (emphasis added). Such immunity is afforded because, when a governmental entity

that qualifies as an arm of the State has been sued, the relationship between the two is such

that “the State is the real, substantial party in interest,” and the entity is its alter ego. Ram

Ditta, 822 F.2d at 457 (cleaned up); see also Hutto v. S.C. Ret. Sys.,

(4th

Cir. 2014). But counties, municipalities, and other similar political subdivisions are not

protected by the Eleventh Amendment as arms of the State, even though they “exercise a

slice of state power.” Lake Country Estates, Inc. v. Tahoe Reg’l Plan. Agency,

(1979) (cleaned up).

To determine whether an entity is an arm of the State, we have articulated a

“nonexclusive list” of four factors to be considered:

(1) Whether any judgment against the entity as defendant will be paid by the State or whether any recovery by the entity as plaintiff will inure to the benefit of the State;

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(2) The degree of autonomy exercised by the entity, including such circumstances as who appoints the entity’s directors or officers, who funds the entity, and whether the State retains a veto over the entity’s actions;

(3) Whether the entity is involved with state concerns as distinct from non- state concerns, including local concerns; and

(4) How the entity is treated under state law, such as whether the entity’s relationship with the State is sufficiently close to make [it] an arm of the State.

S.C. Dep’t of Disabilities,

(cleaned up and spaced for clarity). But the

“most important consideration,” as we have repeatedly emphasized, is the first — i.e.,

“whether the state treasury will be responsible for paying any judgment that might be

awarded.” Hutto,

(quoting Ram Ditta, 822 F.2d at 457). Yet, even when

“the judgment will not be paid from the State treasury,” sovereign immunity may

nonetheless apply where the “governmental entity is so connected to the State that the legal

action against the entity would . . . amount to the indignity of subjecting a State to the

coercive process of judicial tribunals at the instance of private parties,” as determined by

consideration of the remaining three factors. Id. (quoting Cash v. Granville Cnty. Bd. of

Educ.,

, 224 (4th Cir. 2001)).

In this case, Singleton contends that the district court erred in determining that the

State of Maryland would be “functionally liable” for a judgment against TEDCO because

this conclusion overlooks the “vast reserves of substantial moneys” that TEDCO has

available “to pay any judgment levied against it,” emphasizing in particular money held in

the Enterprise Fund and the Reserve Fund. She also contends that, contrary to the district

court’s conclusion, “TEDCO is an autonomous entity” that is “given great leeway” to

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“manage and administer a series of funds with specific statutory purposes.” More

specifically, she asserts that

[t]he control which TEDCO possesses by statute over its own revenue, the ability of TEDCO to procure revenue from other sources and generate it from its own investments, the discretionary use of money appropriated into the various funds, and the ability to use money in the Reserve and Enterprise Funds for its own purposes and reasons indicate that TEDCO, not the State of Maryland, controls its own revenue and indicates autonomy from the State.

Finally, while she acknowledges that the enabling legislation provides that TEDCO is “an

instrumentality of the State,” she argues that that label alone is not dispositive and that state

law overall treats TEDCO as an independent, “quasi-governmental” agency. Accordingly,

she maintains that TEDCO is not immune from suit in federal court under the Eleventh

Amendment.

In response, TEDCO contends that it is indeed an arm of the State. While it

concedes that “an obligation or liability of TEDCO is not an obligation or liability of the

State,” as provided by the enabling statute, it insists that Maryland nonetheless “maintains

functional liability over the liabilities of TEDCO because it provides funding to TEDCO

through the State’s annual budget.” (Emphasis added). It thus argues that “any judgment

that depletes funds provided by the State for a particular state purpose infringes directly on

[the State’s] sovereign interests, further implicating the Eleventh Amendment.” TEDCO

also points to the State’s control over it, asserting that “the State retain[s] control and

ownership over [its] operations”; that TEDCO indisputably “handles statewide concerns”;

and that Maryland “treats [it] like a state agency.”

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In addressing the immunity issue, we begin with the most important factor —

whether the State “could be responsible for the payment of a judgment against” the entity.

Hutto,

. While TEDCO’s enabling statute does provide that the State will

not be legally liable to pay a judgment against TEDCO, see

(providing that “[a] debt, claim, obligation, or liability of the Corporation or any

subsidiary is not: (1) a debt, claim, obligation, or liability of the State, a unit or

instrumentality of the State, or of a State officer or State employee; or (2) a pledge of the

credit of the State”), that does not fully address this factor. As already noted, an entity

“may also constitute an arm of the state where the state is functionally liable, even if not

legally liable.” U.S. ex rel. Oberg v. Pa. Higher Educ. Assistance Agency (“Oberg II”),

(4th Cir. 2014) (latter emphasis added) (cleaned up). In addressing this,

“courts must consider the practical effect of a putative . . . judgment on the state treasury.”

Hutto, 773 F.3d at 543–44 (cleaned up) (quoting Ristow v. S.C. Ports Auth.,

,

1053 (4th Cir. 1995)); see also U.S. ex rel. Oberg v. Pa. Higher Educ. Assistance Agency

(“Oberg III”),

(4th Cir. 2015) (“The functional-liability analysis looks

to whether, as a practical matter, a judgment against a state-created entity puts state funds

at risk, despite the fact that the state is not legally liable for the judgment”). Thus, “[w]here

an agency is so structured that, as a practical matter, if the agency is to survive, a judgment

must expend itself against state treasuries, common sense and the rationale of the eleventh

amendment require that sovereign immunity attach to the agency.” Hess v. Port Auth.

Trans-Hudson Corp.,

(1994) (citation omitted).

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Turning to TEDCO’s circumstances, we agree with the district court that, although

not directly legally liable for a judgment against TEDCO, the State of Maryland would

functionally be liable for such a judgment. Central to this conclusion is TEDCO’s financial

dependence on the State of Maryland. To survive as a viable entity, TEDCO must have

the money that it receives from the State on a yearly basis to pay its expenses and fund its

operations. In other words, TEDCO is not “self-sustaining.” Hess,

. While

TEDCO is certainly authorized to receive and does receive money from non-state sources

and while it also receives a return on its investments and from its operations, its annual

expenditures in the form of economic development grants and other assistance to new

companies outpace its annual revenue from such non-state sources. Thus, its continued

existence and ability to fulfill its State-mandated mission depends on the State continually

refilling TEDCO’s coffers through annual appropriations. And the State does in fact

continually refill TEDCO’s coffers. In these circumstances, we do not have to theorize as

to what would happen “[i]f the expenditures of the enterprise exceed receipts.” Hess,

. That is a fiscal reality. Therefore, while Maryland is not legally obligated

to pay TEDCO’s debts, it is practically responsible for the entity’s solvency.

TEDCO’s financial circumstances thus stand in sharp contrast with both the bistate

railway that the Supreme Court considered in Hess and the profitable State-created student

loan entity that we considered in Oberg. In Hess, the Supreme Court repeatedly stressed

the Port Authority’s “financial independence” in the course of holding that it was not

entitled to Eleventh Amendment immunity, explaining that the fact that the entity was

“financially self-sufficient” meant that the States that created it would not, “as a practical

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matter,” become responsible for paying a judgment against it. 513 U.S. at 49–52; see also

(emphasizing that “the States lack financial responsibility for the Port Authority,”

as it “generates its own revenues, and for decades has received no money from the States”

and that this “[p]oint[ed] away from Eleventh Amendment immunity”);

(explaining that “[t]he Port Authority’s anticipated and actual financial independence —

its long history of paying its own way — contrasts with the situation of transit facilities

that place heavy fiscal tolls on their founding States” and had, on that basis, been found to

share in the State’s sovereign immunity (citation omitted)). Similarly, in Oberg, when

finding that the entity at issue was not an arm of the State, we emphasized that it had

“extensive commercial operations” that had made it “financially independent of the

Commonwealth” and that it had “received no appropriations to support its operations since

1988.” Oberg III,

(cleaned up); see also

at 657–68.

Singleton nonetheless points out that TEDCO’s funds are held in segregated

accounts apart from general state funds, which we have previously recognized to be a

consideration “counsel[ing] against establishing arm-of-the-state status.” Oberg II,

745 F.3d at 138–39. Singleton also argues that TEDCO’s control of the Enterprise Fund,

which was projected to end the 2023 fiscal year with approximately $2.5 million, would

allow it to use this excess to “pay [its] administrative, legal, and actuarial expenses,”

including a judgment against it.

(b)(6) (emphasis

added). She notes similarly that “[p]er the FY 2023 Budget, TEDCO has approximately

$22 [million] in its Reserve Fund, including non-cash assets,” and she thus argues that

“[t]he undeniable existence of these substantial moneys combined with the ability of

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TEDCO to use these moneys to pay a judgment levied against it indicates that the state

treasury will not be affected.”

We, however, find that these arguments do not withstand closer scrutiny. To begin,

it is far from clear that TEDCO could use either the Enterprise Fund or the Reserve Fund

to pay judgments against it. For example, the statutory authorization that allows TEDCO

to use the Enterprise Fund to pay “legal expenses” does not necessarily mean that TEDCO

could use that fund to satisfy a judgment against it. Similarly, much of the money in the

Reserve Fund is restricted to certain programs and their missions and thus would not be

available to pay a judgment against TEDCO. But more importantly, even if TEDCO were

to pay a judgment from these funds, its overarching financial relationship with the State

and the State’s mission would be undermined, and payment of a judgment thus would end

up “interfer[ing] with the State’s fiscal autonomy.” Md. Stadium Auth., 407 F.3d at 264

(cleaned up); see also id. at 263 (recognizing that “the crucial question is whether use of .

. . unappropriated funds to pay a damage award would interfere with the fiscal autonomy

and political sovereignty of the State” (cleaned up)). Thus, in all likelihood, (1) Maryland

funds would end up funding all or part of a judgment entered against TEDCO or

(2) TEDCO’s payment of the judgment from moneys in its funds would adversely affect

the State’s mission.

We therefore conclude that a judgment against TEDCO would implicate Maryland’s

treasury, strongly indicating that TEDCO is an arm of the State for purposes of Eleventh

Amendment immunity.

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Moreover, this conclusion is well reinforced by consideration of the other factors

for determining whether an entity is an arm of the State, all of which focus on protecting

the dignity of the State as sovereign. As we have explained, even where a “State treasury

will not be liable for a judgment, sovereign immunity [nonetheless] applies . . . where the

government entity is so connected to the State that the legal action against the entity would

. . . amount to the indignity of subjecting a State to the coercive process of judicial tribunals

at the instance of private parties.” Hutto,

(cleaned up). And this can be

determined by considering the remaining three factors — “(1) the degree of control that

the State exercises over the entity or the degree of autonomy from the State that the entity

enjoys; (2) the scope of the . . . concerns — whether local or statewide — with which the

entity is involved; and (3) the manner in which State law treats the entity.”

at 546

(quoting Cash, 242 F.3d at 224).

First, the degree of control that the State of Maryland has over TEDCO strongly

indicates that TEDCO is an arm of the State. The annual appropriations process in the

General Assembly demonstrates that, in consultation with the Executive Branch, the

General Assembly makes judgments during the budgetary process about the level of

funding that should be allocated to each of the various funds that TEDCO administers in

furtherance of the State’s mission. Thus, through the power of the purse, the State plays

an active role in determining TEDCO’s direction and priorities for the coming year,

ensuring that TEDCO’s operations reflect the General Assembly’s changing legislative

priorities. And while TEDCO exercises considerable discretion in managing the funds, it

nonetheless must do so in furtherance of the priorities determined by the State. Moreover,

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the State exercises overall control over TEDCO’s discretion by requiring TEDCO each

year to provide both the Governor and the General Assembly with “a complete operating

and financial statement covering [its] operations” and “a summary of [its] activities.”

(a)(2). And in providing that statement, TEDCO goes to

great lengths to demonstrate that it is functioning to further the State’s mission.

In addition, the State’s control over TEDCO is manifested structurally. The State

Treasurer holds each of the TEDCO funds and must invest that money “in the same manner

as other State money.”

(d)(2); 10-448(b)(2), (f);

10-457(f); 10-464(f); 10-469(d)(2), (f); 10-477(d)(2), (g); 10-482(d)(2), (g); 10-486(e)(2),

(g); 10-487(e)(2); 10-488(b)(4)(ii); 10-496(e)(5)(ii); 10-4C-05(b)(2), (g); 10-4D-02(d)(2),

(g). The State Comptroller is required to account for TEDCO’s funds.

The Board of

Directors is appointed by the State.

§ 10-403(a), (b). The State Attorney General is

designated by the State to be TEDCO’s “legal advisor.” Id. § 10-405(a). The State may

conduct an audit of TEDCO “at any time.” Id. § 10-414. TEDCO’s employees are subject

to the State’s Public Ethics Law. Id. § 10-407(c). And, as noted, TEDCO is required

annually to report to the State — the Governor and the General Assembly. Id. § 10-415(a).

Second, as to the factor of whether the scope of the entity’s concerns are local or

statewide, it is undisputed that TEDCO’s concerns are statewide. This is reflected in the

provisions for the creation of TEDCO’s Board, which state that the Governor must consider

whether board members represent “all geographic regions of the State.”

(e)(2).

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Finally, as to the factor of how state law treats the entity, we find telling both the

manner in which the State engages in its appropriation process and the control it exercises

over the funding and structure of TEDCO. While the State authorizes TEDCO latitude in

how it carries out the State’s mission, in exercising ultimate control of all decisions and

finances, it treats TEDCO substantially as an agency.

At bottom, we conclude that TEDCO is an arm of the State of Maryland and

therefore that it is protected from Singleton’s suit by the Eleventh Amendment.

Accordingly, we affirm the district court’s order dismissing the complaint on that ground.

AFFIRMED

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