Florida Prepaid v. College Savings Bank

Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank (1999) is a landmark U.S. Supreme Court case dealing with the ability of Congress to abrogate sovereign immunity for claims involving intellectual property.

The Eleventh Amendment confirms that the states retain sovereign immunity from lawsuits. However, this immunity is not absolute. Congress, in exercising its powers to enforce the Fourteenth Amendment, may abrogate the states’ immunity. Moreover, states may voluntarily waive their immunity. Finally, when there are ongoing violations of federal law, the doctrine established in the landmark case Ex Parte Young (1908) generally allows federal courts to enjoin state officials from engaging in unlawful behavior. Florida Prepaid involved the abrogation exception to sovereign immunity. The U.S. Supreme Court’s ruling in Florida Prepaid established that Congress has not abrogated the states’ sovereign immunity for claims involving intellectual property; thus, states and state agencies remain immune from intellectual property claims. Insofar as most public institutions, including colleges and universities, are considered arms of their states for purposes of the Eleventh Amendment immunity claims, this entry reviews the analysis in Florida Prepaid and its significance for higher education. 

Facts of the Case

The litigation arose out of a dispute between a state agency in Florida that administered a prepaid tuition program and a bank in New Jersey. After the bank in New Jersey had secured a patent for a particular financing methodology, it claimed that the state agency in Florida violated its patent. Although the Florida agency normally would have been immune from such a claim, Congress had enacted a statute purporting to abrogate the states’ sovereign immunity for intellectual property claims. In light of this, the agency in Florida contended that this purported abrogation was unconstitutional. Even so, both the federal trial court in New Jersey and the court of appeals for the Federal Circuit, a specialized court with jurisdiction over patent claims, rejected the Florida agency’s position. The Supreme Court then agreed to hear an appeal. 

The Supreme Court’s Ruling

On further review, in a five-to-four decision authored by Chief Justice Rehnquist and joined by Justices O’Connor, Scalia, Kennedy, and Thomas, the Court reversed in favor of the agency from Florida on the basis that Congress’s attempt to abrogate sovereign immunity was unconstitutional. The Court began by noting that Congress had made its intention to abrogate clear and that Congress could not use its Article I powers to abrogate sovereign immunity. To this end, the Court identified the critical issue as whether Congress had properly used its power to enforce the Fourteenth Amendment. 

The dispute before the Supreme Court in Florida Prepaid turned on the application of the test from the 1997 landmark case of City of Boerne v. Flores, wherein the Supreme Court invalidated the federal Religious Freedom Restoration Act in a suit over historical preservation at a church in Texas. Reformulating the Flores test, the Court focused on whether Congress had identified a pattern of constitutional violations by the states and if so, whether abrogating sovereign immunity was an appropriate response to that pattern. The Court pointed out that Congress failed on both inquiries. First, the Court ruled that Congress had never identified a pattern of patent infringement, much less a pattern of constitutional violations. Second, the Court reasoned that the broad remedy imposed by Congress, namely abrogating sovereign immunity for all patent claims against all states for an indefinite period, was not the type of limited remedy required by the Constitution. Accordingly, the Court struck down as unconstitutional the statute that purported to abrogate sovereign immunity. 

Justice Stevens, joined by Justices Souter, Ginsburg, and Breyer, vigorously dissented. In their view, Congress had the power to establish national uniformity with respect to patents, and that included the ability to abrogate the states’ sovereign immunity. At the same time, the dissent was of the opinion that the congressional findings of potential patent violations were more than sufficient to satisfy the Flores standard. The dissent also emphasized its disagreement with the Court’s recent reaffirmation of sovereign immunity principles. 

A decade after it was decided, the Court has not limited its judgment in Florida Prepaid. Indeed, in later cases the Court has expanded this rationale in other substantive areas of the law. For state universities that are considered an arm of the state, Florida Prepaid and its progeny remains a foundational case protecting them from liability.

William E. Thro

See also Central Virginia Community College v. Katz; Kimel v. Florida Board of Regents

Further Readings

  • Board of Trustees of the University of Alabama v. Garrett, 531 U.S. 356 (2001). 
  • Central Virginia Community College v. Katz, 126 S. Ct. 990 (2006). 
  • Chisholm v. Georgia, 2 U.S. (2 Dall.) 419 (1793). 
  • College Savings Bank v. Florida Prepaid, 527 U.S. 666 (1999). 
  • Federal Maritime Commission v. South Carolina State Ports Authority, 535 U.S. 743 (2002). 
  • Kimel v. Florida Board of Regents, 528 U.S. 62 (2000). 
  • Nevada Department of Human Resources v. Hibbs, 538 U.S. 721 (2003). 
  • Noonan, J. T., Jr. (2002). Narrowing the nation’s power: The Supreme Court sides with the states. Berkeley: University of California Press. 
  • Puerto Rico Aqueduct & Sewer Authority v. Metcalf & Eddy, 539 U.S. 139 (1993). 
  • Seminole Tribe v. Florida, 517 U.S. 44 (1996). 
  • Tennessee Student Assistance Corporation v. Hood, 541 U.S. 440 (2004). 
  • Tennessee v. Lane, 541 U.S. 509 (2004). 
  • Thro, W. E. (1999). The Eleventh Amendment revolution in the lower federal courts. Journal of College & University Law, 25, 501–525. 
  • Thro, W. E. (2000). The education lawyer’s guide to the sovereign immunity revolution. Education Law Reporter, 146, 951–931. 
  • Thro, W. E. (2007). The future of sovereign immunity. Education Law Reporter, 215, 1–31. 
  • Thro, W. E. (2007). Why you cannot sue State U: A guide to sovereign immunity (2nd ed.). Washington, DC: National Association of College and University Attorneys
  • United States v. Georgia, 126 S. Ct. 877 (2006). 

Legal Citations

  • City of Boerne v. Flores, 521 U.S. 507 (1997). 
  • Ex Parte Young, 209 U.S. 123 (1908). 
  • Florida Prepaid v. College Savings Bank, 527 U.S. 627 (1999).