Colllege football coaches and diversity jurisdiction

Here is an interesting diversity jurisdiction puzzle, for anyone looking for one (and you know you are).

Penn State sued Bob Shoop, its former defensive coordinator, to recover close to $ 1 million on the buyout clause, after Shoop left PSU to take a similar job at Tennessee. Penn State filed in Pennsylvania Commonwealth Court, then Shoop removed to the Middle District of Pennsylvania, based on diversity. And this confused me. Penn State is a state university. And a "state" is not a "citizen of a state" for diversity purposes; when a state brings a non-federal claim against a citizen of another state to federal court, original jurisdiction rests with SCOTUS (concurrent with state courts). The case thus should not be removable, because the district court lacked subject matter jurisdiction. This looked to me on all fours with a case from about ten years ago--involving West Virginia University's attempt to enforce a buyout clause against its former head football coach--in which the university filed in its state courts and the coach removed, but the district court remanded for lack of jurisdiction because the university was the state.

It turns out that Penn State (along with the larger public universities in Pennsylvania, such as Pitt and Temple) is a "state-related" university, as opposed to a state university. Although I am not sure of all the differences, state-related universities receive less funding and are entities created by state law that maintain affiliations with the state (sufficient to make them act under color for Fourteenth Amendment and § 1983 purposes), but are not treated as alter-egos of the state. District courts in Pennsylvania have held that Pennsylvania's state-related schools do not enjoy Eleventh Amendment immunity.

This matters because most circuits use the same analysis to identify an entity as an arm of the state for Eleventh Amendment purposes as for § 1332 purposes--that is, if an entity is an arm of the state entitled to Eleventh Amendment immunity, it is an arm of the state and not a citizen of the state for diversity purposes. That is how the federal court involved the West Virginia case. Because the prevailing view is that Penn State does not enjoy Eleventh Amendment immunity, it should follow that the district court has jurisdiction in this case.

I am curious to see if Penn State at least tries to move to remand or if it knows it will lose on the point. A recent possible comparison is Haywood v. University of Pittsburgh, a suit brought in federal court by--you guess it--the former football coach. Haywood included three claims--two for breach of contract (with jurisdiction under § 1332) and one for a violation of due process (with jurisdiction under § 1331); Pitt did not contest jurisdiction and the court reached the merits. This would suggest that a state-related university can be sued in federal court on diversity. But Haywood may be of limited use. The due process claim gave the district court original jurisdiction, with supplemental jurisdiction over the state claims, all regardless of diversity (Haywood did not assert § 1367 in the Complaint, which may just be unwise drafting). So it may have been that Pitt knew there would be jurisdiction anyway, regardless of the basis, so there was no point in contesting. The Penn State case squarely presents the question of the university's status for § 1332 purposes.