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Expressly Agreeing to Federal Jurisdiction in an Agreement Waives Eleventh Amendment Immunity

October 10, 2007

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Last Month at the Federal Circuit - November 2007

Judges:  Newman (author), Friedman, Moore (concurring-in-part)

[Appealed from: W.D. Mich., Judge Carmody]

In Baum Research & Development Co. v. University of Massachusetts at Lowell, No. 06-1330 (Fed. Cir. Oct. 10, 2007), the Federal Circuit affirmed the district court’s judgment, holding that the University of Massachusetts at Lowell (“the University”) waived its Eleventh Amendment immunity by expressly agreeing to federal jurisdiction in an agreement.

Charles S. Baum is the inventor of the two U.S. patents that relate to a device for testing baseball bats. In December 1998, he and the Baum Research and Development Company (collectively “Baum”) entered into a “Confidential License Agreement” with the University. The agreement included the following provision (“Contract Provision III-3”): “This Agreement will be construed, interpreted and applied according to the laws of the State of Michigan and all parties agree to proper venue and hereby submit to jurisdiction in the appropriate State or Federal Courts of Record sitting in the State of Michigan.” Slip op. at 2. When a dispute arose between the parties, Baum filed suit in the District Court for the Western District of Michigan, alleging breach of contract and patent infringement. The University asserted immunity from suit based on the Eleventh Amendment. The district court denied the University’s motion to dismiss, finding that any immunity was waived by Contract Provision III-3. It then bifurcated the contract and infringement claims, and held a jury trial on the breach of contract claim. Baum prevailed, but on a post-trial motion, the University renewed its claim of immunity. The district court again denied the University’s motion. The district court then stayed further proceedings pending appeal of the immunity issue to the Federal Circuit.

On appeal, the Federal Circuit observed that the Eleventh Amendment limits the judicial authority of the federal courts and bars unconsented suit against a state in federal court. The Court noted that the University claimed immunity as an arm of the state and that Baum did not dispute that status as a state entity was created by a Massachusetts law. As a result, the issue on appeal was whether the University waived its Eleventh Amendment immunity by expressly agreeing to federal jurisdiction in the agreement. The Court noted that in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666, 675-76 (1999), the Supreme Court stated that a state waives its immunity when it clearly declares its intention to submit to federal jurisdiction, but the intention must be “unequivocally expressed.” Slip op. at 4. At the same time, however, the Federal Circuit noted that general consent provisions standing alone, such as general sue-and-be-sued clauses, have been held insufficient to waive Eleventh Amendment immunity.

Under this framework, the University argued that Contract Provision III-3 contained “vague language” and was not the “unequivocally expressed” consent to suit that precedent required. The Federal Circuit rejected this argument. It agreed with the district court that the contract terms were “clear, and that the University agreed to submit to the jurisdiction of a federal court in Michigan as to disputes arising from [the] contract.” Id. at 5. The Court noted that although the University argued that the contract did not state which court is appropriate as to which cause of action as may arise, this did not negate the agreement to submit to the jurisdiction of the appropriate court. As a result, the Federal Circuit affirmed the district court’s ruling that the contract between Baum and the University was not ambiguous as to the mutual obligation to submit to jurisdiction of the state and federal courts in Michigan, and that the University had waived its Eleventh Amendment immunity.

The University contended that even if the contract obligated it to submit to federal jurisdiction, neither the University nor Louise G. Griffin, who signed the agreement on behalf of the University, had authority to enter into a contract that waived the state’s Eleventh Amendment immunity. Rejecting this argument, the Federal Circuit noted that the record contained no representation by the State of Massachusetts that the University had no authority to enter into the contract with Baum. Moreover, the Court noted that Ms. Griffin testified that the University had entered into, and she had executed for the University, hundreds of contracts containing this provision, and that the University had never attempted to impugn her authority to do so in the past. The Court further noted that the University did not deny that it had authority to enter into this contract with Baum, but was arguing that Baum must affirmatively prove that the Massachusetts legislature delegated to the University the authority to include in the contract a waiver of immunity in federal court should a dispute arise. The Federal Circuit, however, found no support for the argument that the University’s contract authority must be proved, when the University did not deny that authority.

Accordingly, the Federal Circuit affirmed the district court, concluding that it had not erred in its ruling that the Contract Provision III-3 was a clear and unambiguous consent to the jurisdiction of a Michigan federal court for disagreements arising from the license agreement.

Judge Moore concurred in the Court’s judgment, but did not join the Court’s opinion that dealt with the issue of whether the University had authority to enter into the agreement with Baum.