Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 05 C 1263-Sarah Evans Barker, Judge.
The opinion of the court was delivered by: Manion, Circuit Judge.
Before BAUER, RIPPLE, and MANION, Circuit Judges.
Plaintiffs, seven former employees of the State Lottery Commission of Indiana, which does business under the name Hoosier Lottery (hereinafter "Lottery"), sued their former employer under 42 U.S.C. § 1981 and Title VII of the Civil Rights Act of 1964. They claimed that they were fired because of their race. The Lottery moved to dismiss the plaintiffs' § 1981 claims on the basis that it was a state agency and therefore entitled to sovereign immunity pursuant to the Eleventh Amendment. The district court denied the Lottery's motion, and we affirm.
The Indiana General Assembly created the Lottery in 1989 to operate lottery games "as a separate body politic and corporate from state government." Ind. Code § 4-30-1-2(1). It intended the Lottery to function "as much as possible as an entrepreneurial business enterprise," and mandated "[t]hat the lottery games be operated as a self-supporting revenue raising operation." Id. § 4-30-1-2(1), (3). Over the years, the Lottery has more than proved its ability to raise revenue: from its inception, the Lottery has made over $3 billion in profits, including over $210 million in fiscal year 2007 alone. Ind. State Budget Agency, Distribution of Build Indiana Fund and Lottery and Gaming Revenues 3 (2007), http://www.in.gov/sba/files/LGS_ Distribution_Report_ 2007.pdf (last visited Sept. 23, 2008).
To enable the Lottery to commence operations, the Indiana General Assembly authorized up to $18 million in start-up appropriations. As it turned out, the Lottery did not need that much money to get up and running. The Lottery's audit statement of cash flows for its first fiscal year shows that the money actually appropriated from the State during that period was just over $6 million, and that sum was promptly repaid with interest during the same fiscal year. The parties have stipulated that the Lottery's financial reports show no other appropriations from the state other than that initial, promptly repaid sum.
The governor of Indiana appoints a five-member commission to operate the Lottery as well as a director, who is charged with "maximiz[ing] revenues in a manner consistent with the dignity of the state and the welfare of its citizens." Ind. Code §§ 4-30-5-1, -3. The Lottery is "a body politic and corporate separate from the state." Id. § 4-30-3-1. It has the authority to sue and be sued in its own name. Id. When the Lottery is sued, the director of the Lottery makes the final decision about whether the Lottery will agree to a settlement and how much the Lottery will pay. When the Lottery pays a monetary settlement or any other legal obligation, the money comes from the Lottery's administrative trust fund as a general operating expense. Should the Lottery default on any of its monetary obligations, the Indiana Attorney General's official position is that the state would not be liable. 1991 Ind. OAG No. 10.
The Lottery deposits all of its revenue, which is "continually appropriated" to the Lottery, in an administrative trust fund that is separate from the state's general fund. See Ind. Code §§ 4-30-15-1, 4-8.1-1-3. The money in the administrative trust fund is used to pay the prizes and the Lottery's expenses, such as the cost of supplies and any legal settlement or monetary judgment. Id. § 4-30-16-1. After the payment of prizes and expenses, the surplus revenue from the administrative trust fund is disbursed as follows: $7.5 million each quarter goes to the state treasurer for deposit in the Indiana state teachers' retirement fund; $7.5 million each quarter goes to the state treasurer for deposit in the pension relief fund; and any surplus remaining in the Lottery fund on the last day of January, April, July, and October after the transfers to the pension funds goes to the state treasurer for deposit in the "build Indiana fund." Id. § 4-30-16-3. The build Indiana fund is used for state or local capital projects, though prior to using the funds for that purpose the state treasurer is required to transfer $19,684,370 each month from the build Indiana fund to what is exhaustively titled the "state general fund motor vehicle excise tax replacement account." Id. § 4-30-17-3.5(a). In the event that the funds in the build Indiana fund are insufficient to meet the required transfer amount, the "auditor of state" is required to make up the difference from the state general fund. Id. § 4-30-17-3.5(b).
For the most part, the Lottery operates independently from the state. It establishes its own annual budget and is not required to submit its budget to the Indiana General Assembly for approval. It determines the type of lottery games it conducts and the manner in which it conducts them. See id. § 4-30-3-7. It selects its own internal auditor. It has the power to purchase its own insurance; own, sell, and lease real and personal property; and own and enforce copyrights, trademarks, and service marks. Id. §§ 4-30-3-10 to -12. It has the power to enter into contracts for the purchase or lease of goods and services. Id. §§ 4-30-3-16 to -17. And it establishes and maintains its own personnel program for its employees.
Though the Lottery has substantial operational independence, it is still heavily regulated by the state. The Lottery is required to maintain weekly records of lottery transactions. Id. § 4-30-3-4. It is subject to an annual audit by the state board of accounts and the state budget agency.
Id. §§ 4-30-19-1 to -2. It must submit revenue and expenditure reports to the state budget agency and each legislative member of the budget committee upon request. Id. § 4-30-19-4.2. It also has to submit monthly and annual reports to the governor disclosing revenue, expenses, and prize payouts. Id. § 4-30-3-3. In addition, the Lottery, like other public entities, is subject to the Indiana Open Door Law, see id. § 5-14-1.5-2(a)(3)(B), and the Indiana Public Records Act, id. § 5-14-3-2(m)(8).
This action was brought after each of the plaintiffs' employment at the Lottery was terminated between January and May 2005. All but one of the plaintiffs brought their employment discrimination claims against the Lottery solely under § 1981. The Lottery moved to dismiss the plaintiffs' § 1981 claims on the basis of ...