When an erstwhile shareholder of First Republic Bank sued the California Department of Financial Protection & Innovation for failing to safeguard the “financial soundness and structural integrity” of the bank, the DFPI “took the Eleventh”. The Eleventh Amendment to the Constitution 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.
In this case, the plaintiff was a citizen of the Netherlands. Thus, a dismissal would seem to be a “slam dunk”. However, there was one wrinkle – had the State of California consented to be sued in federal court? California Government Code Section 815.6 allows suits against government entities for damages against public entities that fail to discharge a “mandatory duty imposed by an enactment”. Nonetheless, U.S. District Court Judge Kari A. Dooley granted the DFPI’s motion to dismiss because Section 815.6 “does not unequivocally express the State of California’s consent to be sued in federal court”. Nijland v. Dep’t of Fin. Prot. & Innovation, CA, 2024 WL 4450749 (D. Conn. Oct. 9, 2024).
The Eleventh Amendment was adopted to overrule Chisolm v. Georgia, 2 US 419 (1793) in which the Supreme Court held that a private citizen could sue the State of Georgia in federal court for nonpayment for goods supplied during the Revolutionary War. The State of George was so outraged by the decision that it enacted law providing that anyone attempting to levy judgment in the case “are hereby declared to be guilty of felony, and shall suffer death, without the benefit of clergy, by being hanged”. Wm. Fletcher, A Historical Interpretation of the Eleventh Amendment: A Narrow Construction of an Affirmative Grant of Jurisdiction Rather than a Prohibition Against Jurisdiction, 35 Stanford L. Rev. 1033, 1058 n. 113 (1983).
