## Facts

- The City of New York, the Board of Education of the City School District of the City of New York, the Mayor, and the Chancellor (municipal plaintiffs) sued the State of New York and various state officials involved in public-school finance.
- The municipal plaintiffs sought declaratory and injunctive relief challenging the State’s statutory scheme for financing public education.
- The complaint alleged the financing scheme (1) denied New York City schoolchildren rights guaranteed by the Education Article of the New York Constitution (art. XI, § 1), (2) treated City public-school children differently in violation of federal and state equal-protection guarantees, and (3) had a disparate impact on racial and ethnic minority schoolchildren in violation of Title VI of the Civil Rights Act of 1964 and related regulations.
- The State moved to dismiss, arguing the municipal plaintiffs, as political subdivisions of the State, lacked legal capacity to sue the State to challenge state statutes.
- Supreme Court (New York County) dismissed the action for lack of capacity to sue.
- The Appellate Division affirmed on the same ground.
- The municipal plaintiffs appealed to the New York Court of Appeals; the Court took up only the capacity question and did not reach the merits of the constitutional or Title VI allegations.

## Issues

1. Whether the City of New York and its related municipal entities and officers have legal capacity to sue the State of New York to challenge the legality and constitutionality of the State’s public-school funding statutes.
2. Whether any recognized exception to the general rule barring municipal suits against the State applied, including (a) express statutory authorization, (b) a claim aimed at protecting municipal home-rule powers, or (c) a claim based on the municipality’s proprietary or corporate interests.

## Decision

- The Court of Appeals affirmed the Appellate Division’s order dismissing the complaint.
- The Court held the municipal plaintiffs lacked legal capacity to sue the State to attack the State’s school-financing scheme.
- The Court explained that “capacity” is distinct from “standing”; lack of capacity is a defense that must be raised by motion and can be waived if not timely asserted.
- The Court applied the traditional rule that municipalities and similar local governmental entities, created by the State to carry out state functions, generally cannot sue the State to challenge state legislation affecting them in their governmental role.
- The Court rejected the municipal plaintiffs’ reliance on exceptions:
  - No statute expressly (or by necessary inference) authorized these municipal plaintiffs to bring this type of broad constitutional and statutory challenge to state education-funding laws.
  - The home-rule exception did not apply because the claims were not aimed at preserving the City’s own self-government powers; they asserted alleged violations of schoolchildren’s educational and equality rights.
  - The proprietary-interest exception did not apply because the City was not suing as a property holder, contracting party, or market participant to protect a distinct municipal corporate interest.
- The Court declined to decide the merits of the Education Article, equal-protection, or Title VI claims because the lack of capacity was dispositive.
- Judge Ciparick dissented (joined by Judge Smith). Chief Judge Kaye took no part.

## Legal Principles

- A municipality and its officers, as political subdivisions of the State, generally lack legal capacity to sue the State to challenge the constitutionality or legality of state statutes affecting the municipality in its governmental role.
- “Capacity to sue” is different from “standing”; capacity concerns the entity’s legal authority to appear in court, and lack of capacity is a waivable defense that must be raised by motion (CPLR 3211(a)(3), (e)).
- Recognized, narrow exceptions may allow a municipal suit against the State, including:
  - express statutory authorization (expressly or by necessary inference);
  - a claim to protect the municipality’s own home-rule powers against a direct invasion of local self-government authority; and
  - a claim to protect a municipality’s proprietary or corporate interests, as distinct from interests of residents.
- A municipality ordinarily may not sue the State to assert the constitutional or civil-rights claims of its inhabitants; such claims must be brought by parties who possess the rights at issue and have standing to litigate them.
- The same capacity limits apply to municipal attempts to pursue federal constitutional or Title VI theories against the State in state court absent a clear grant of authority overriding the state-law capacity rule.

## Conclusion

The Court of Appeals affirmed dismissal because the City and its school officials, acting as municipal entities, lacked legal capacity to sue the State over New York’s public-school financing statutes, and no exception—statutory authorization, home-rule protection, or proprietary-interest litigation—fit the claims, so the Court did not reach the alleged Education Article, equal-protection, or Title VI violations.


City of New York v. State of New York, 86 N.Y.2d 286, 631 N.Y.S.2d 553, 655 N.E.2d 649 (1995)