Hopkins v. Wayside Schs.

1

Deroald Hopkins, Plaintiff-Appellant, v. Wayside Schools, Defendant-Appellee.

No. 23-50600

United States Court of Appeals, Fifth Circuit

August 9, 2024

Appeal from the United States District Court for the Western District of Texas USDC No. 1:21-CV-334

Before KING, STEWART, and HIGGINSON, Circuit Judges.

PER CURIAM: ^[*]

In January 2020, Plaintiff-Appellant Deroald Hopkins was terminated from his employment with Wayside Schools, a nonprofit organization that operates open-enrollment charter schools in Texas. Hopkins alleges that he was terminated for reporting mismanagement of federal funds, in violation of 41 U.S.C. § 4712. He further alleges that he was terminated due to his race in violation of 42 U.S.C. § 1981 and the Equal Protection Clause of the Fourteenth Amendment.

The district court dismissed Hopkins's claims, concluding that Wayside Schools is entitled to Eleventh Amendment sovereign immunity as an "arm of the state." We disagree, finding that Wayside Schools has not met its burden of proving that it is entitled to Eleventh Amendment immunity. Accordingly, we REVERSE the district court's dismissal of Hopkins's whistleblower-retaliation claim under 41 U.S.C. § 4712, and we relatedly REVERSE the district court's order striking this claim from the operative complaint. However, we AFFIRM the dismissal of Hopkins's race-discrimination claim brought pursuant to 42 U.S.C. § 1981 and the Equal Protection Clause of the Fourteenth Amendment via 42 U.S.C. § 1983, agreeing with the district court that Hopkins has not stated a plausible claim for relief.

I. A.

The following facts originate from Plaintiff-Appellant Hopkins's first amended complaint. Deroald Hopkins, an African-American man, started working for Wayside Schools ("Wayside") as its Chief Operations Officer/Chief Financial Officer in November 2017. Hopkins was the only management-level African-American employee at Wayside. Hopkins initially received positive feedback for his work including a strong performance evaluation.

Soon after his employment began, Hopkins purportedly started discovering "numerous financial errors, mismanagement, and misappropriation of both state and federal funds received by Wayside." For example, Hopkins found that federal funding was being miscoded, resulting in these funds being utilized for improper purposes. He further discovered that Wayside was commingling operational funds, state and federal funds, and debt service funds in one account.

Hopkins reported this "gross mismanagement of funds" to Wayside's superintendent and finance committee, and these financial issues were discussed at board meetings, committee meetings, and individual meetings up until November 2019. However, according to Hopkins's complaint, instead of taking corrective action, Wayside "put a target on [Hopkins's] back" and began engaging in retaliation.

First, Katherine Fugate, the Director of Wayside's Special Education Program, made unsubstantiated or false claims that Hopkins (1) misappropriated federal funds, (2) made disparaging comments about her, and (3) ignored and excluded her. Then, on January 7, 2020, Hopkins was terminated by Superintendent Matthew Abbott and John Troy, Chairman of the School Board. The reasons provided to Hopkins for his termination were a "lack of clear communication and reliable board reporting," "submitting an incorrect budget amendment," and "other financial errors and failures." Hopkins claims that he was actually terminated due to his whistleblowing efforts, "which brought to light all of these financial issues that had been accumulating over previous fiscal years." Furthermore, Hopkins points out that two non-African-American outside auditors who also reported financial mismanagement were not fired or reprimanded.

In addition, Hopkins outlines other instances of mistreatment that he claims were racially discriminatory. On one occasion, Superintendent Abbott, who is white, responded to Hopkins's report of financial issues by "call[ing] [Hopkins] a jerk and then mutter[ing] several other insulting names under his breath." Hopkins also alleges that Abbott "would yell at him and engage in name-calling" when Hopkins reported financial mismanagement. According to Hopkins, no non-African-American management-level employees were subjected to similar demeaning treatment from Abbott.

B.

On April 15, 2021, Hopkins filed suit against Wayside in the U.S. District Court for the Western District of Texas. The original complaint alleges that Hopkins was subjected to whistleblower retaliation in violation of 41 U.S.C. § 4712, as well as race discrimination in violation of 42 U.S.C. § 1981. Hopkins's § 1981 claim was brought against Wayside pursuant to 42 U.S.C. § 1983.^[1]

On June 15, 2021, Wayside filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. In its motion, Wayside asserted Eleventh Amendment sovereign immunity as a defense to Hopkins's whistleblower-retaliation and race-discrimination claims. Wayside further argued that Hopkins failed to plead a plausible racediscrimination claim under 42 U.S.C. § 1981. Then, seemingly interpreting Hopkins's reference to 42 U.S.C. § 1983 as a separate cause of action, Wayside argued that Hopkins failed to plead a plausible race-discrimination claim under § 1983.^[2] The district court agreed with Wayside. In an order granting Wayside's motion to dismiss, the court held that Hopkins's 41 U.S.C. § 4712 and 42 U.S.C. § 1981 claims are barred by the Eleventh Amendment, since Wayside is an "arm of the state for purposes of sovereign immunity." Then, also seeming to interpret Hopkins's reference to § 1983 as a separate cause of action, the district court concluded that Hopkins's complaint failed to state a plausible "Section 1983 discrimination claim."

At the end of its order granting Wayside's motion to dismiss, the district court granted Hopkins an opportunity to amend his complaint, concluding that an amendment may not be futile "if Hopkins can plead, in good faith, a specific factual basis for his Section 1983 discrimination claim." Hopkins notes that the district court's proceedings appear to have contained some inconsistencies regarding the application of Eleventh Amendment sovereign immunity. Unless waived by the state, Eleventh Amendment sovereign immunity remains intact for claims brought pursuant to § 1983. See Richardson v. S. Univ., 118 F.3d 450, 453 (5th Cir. 1997); NiGen Biotech, L.L.C. v. Paxton, 804 F.3d 389, 393-94 (5th Cir. 2015). Accordingly, as Hopkins noted in a motion for clarification, if Wayside is entitled to Eleventh Amendment sovereign immunity, any amendment to Hopkins's factual pleadings related to a § 1983 claim would be futile.^[3]

Nevertheless, Hopkins filed a first amended complaint, which additionally alleged that Hopkins was terminated in violation of the Equal Protection Clause of the Fourteenth Amendment. Shortly thereafter, Wayside filed a renewed motion to dismiss. Wayside also moved for the district court to strike from the first amended complaint Hopkins's 41 U.S.C. § 4712 and 42 U.S.C. § 1981 claims, since the district court had previously held that these claims are barred by Eleventh Amendment sovereign immunity.

On March 8, 2023, this court issued its opinion in Springboards to Education, Inc. v. McAllen Independent School District, 62 F.4th 174 (5th Cir. 2023). In Springboards, we held that IDEA Public Schools ("IDEA"), another nonprofit organization operating charter schools in Texas, is not an "arm of the state" entitled to assert Eleventh Amendment sovereign immunity. Id. at 183. Shortly after Springboards was issued, Hopkins moved for the district court to reconsider its holding on Wayside's sovereign immunity.

On August 11, 2023, the district court issued an order disposing of Hopkins's motion for reconsideration and Wayside's renewed motion to dismiss. Addressing Hopkins's motion for reconsideration first, the district court reevaluated Wayside's assertion of sovereign immunity in light of Springboards's precedent, and it affirmed its prior holding that Wayside is an "arm of the state." Turning to Wayside's motion to dismiss, the district court concluded that Hopkins's amended complaint fails to state a plausible race-discrimination claim. Finally, the district court struck the portion of Hopkins's first amended complaint alleging his whistleblower-retaliation claim brought pursuant to 41 U.S.C. § 4712. Hopkins timely filed a notice of appeal.

II.

We review de novo a district court's grant of a motion to dismiss brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001). "When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits." Id.

A motion to dismiss brought pursuant to Rule 12(b)(1) challenges the court's subject-matter jurisdiction. See FED. R. CIV. P. 12(b)(1). Because Eleventh Amendment sovereign immunity deprives a federal court of jurisdiction to hear a suit against a state, a defendant's motion to dismiss asserting Eleventh Amendment sovereign immunity is properly brought under Rule 12(b)(1). See Warnock v. Pecos County, 88 F.3d 341 343 (5th Cir. 1996). Subject-matter jurisdiction may be addressed by considering: "(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Ramming, 281 F.3d at 161. In reviewing a district court's dismissal under Rule 12(b)(1), "we take the well-pled factual...