While state-law sovereign immunity doctrines apply in state court by virtue of Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), the Fifth Circuit holds in Anthology, Inc. v. Tarrant Cnty. Coll. Dist. (TCCD), No. 24-10630 (5th Cir. May 2, 2025), that they are treated as defenses and do not affect Article III subject-matter jurisdiction.
Anthology, a software company, sued TCCD in federal court for “breach of contract. TCCD moved to dismiss under Federal Rules 12(b)(1) and 12(b)(6), raising four separate grounds for dismissal. First, TCCD argued that it was entitled to immunity from suit under Texas law. Second, it argued that it was entitled to state sovereign immunity—that is, the federal doctrine protecting unconsenting States from private suits. Third, it argued that because it is an arm of the State, the district court lacked diversity jurisdiction. Fourth and finally, it argued that Anthology is statutorily barred from recovering damages under Texas law.”
Ruling only on the first of these arguments, the district court dismissed the action without prejudice under Rule 12(b)(1).
The Fifth Circuit vacates and remands. “We (A) begin with a brief overview of the oft-confused immunities implicated in this case. Then we (B) explain that because a state-law immunity cannot limit federal jurisdiction, the district court erred in addressing this issue before assessing its jurisdiction.”
“Texas law has established at least two immunities from suit: state-law sovereign immunity and governmental immunity . . . . ‘sovereign immunity protects the state and its various divisions, such as agencies and boards, from suit and liability,’ while ‘governmental immunity provides similar protection to the political subdivisions of the state, such as counties, cities, and school districts.’”
While states enjoy sovereign immunity in federal court, as derived from the U.S. Constitution, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 100 (1984), and which does limit federal-judicial power, that rule is distinct from state-law immunity doctrines.
“No matter how Texas courts treat their own state-law immunities, these doctrines cannot limit the jurisdiction of federal courts. Only Congress and the Constitution define—and thus can limit—the jurisdiction of federal courts . . . . So state-law sovereign immunity and governmental immunity cannot have jurisdictional effect in federal court.”
“The district court thus made two errors. First, the district court held that Texas’s state-law immunity from suit deprived it of subject matter jurisdiction. But state-created immunities do not and cannot limit the jurisdiction of federal courts. If these state-law immunities apply at all in federal court under the Erie doctrine, . . . they must be treated as non-jurisdictional, merits-based defenses.”
“The second error flows directly from the first. The district court dismissed for lack of jurisdiction—without addressing the two other bases for dismissal that really do implicate subject matter jurisdiction. State sovereign immunity and the absence of complete diversity—unlike state-law immunities—are jurisdictional defects. And either of the former two problems would require a without-prejudice jurisdictional dismissal. Such jurisdictional problems must be addressed first, before the district court considers any merits-based defenses.”
“A state-law immunity cannot limit the jurisdiction of federal courts. So the district court should not have considered that issue first. Accordingly, we VACATE the district court’s judgment and REMAND for further proceedings consistent with this opinion.”