Remedies in InterChange

[Christopher C. Lund]

I have no real question about the merits, but do have one about the remedy.
 
The relief in this suit runs not only against Iowa, but against InterChange itself on the ground that "[p]rivate parties, jointly engaged with state officials in the prohibited action, are acting under color of state law for purposes of [sec. 1983]."  Op. at 2 n.3 (citing Lugar v. Edmonson Oil).  InterChange therefore not only can't recover any funds that Iowa currently owes it, but it also has to repay all the money it ever received from Iowa since the program began in 1999 (about $1.5 million).
 
The first thing that strikes me is that there are very few parameters on district judge's decision to award recoupment, a decision that is left entirely to his equitable discretion.  He says that the constitutional violation here was serious and obvious, and that InterChange is a well-financed organization, and for that reason recoupment is proper.  That may all be true; maybe I'm just surprised there isn't more established law guiding his discretion on this.
 
But the question I have is whether this broad notion of state action is appropriate here.  When a religious group is given preferential treatment by the state, the state should no question be liable.  But do we really want to impose liability on the religious group?  Could AU have just sued InterChange (and left Iowa out of it)?  Could the ACLU in Santa Fe have just gone after the praying students themselves, on the ground that their state-granted preferential access makes them state actors that are bound to pay any resulting damage judgments (and, of course, attorneys' fees)?  
 
Of course, I recognize the recoupment question is difficult.  Denying recoupment here will leave the plaintiffs with no real remedy.  A judgment against the state alone doesn't work in Establishment Clause cases challenging the expenditure of taxpayer funds, as the real harm is never corrected and taxpayers aren't exactly vindicated by a judgment that runs ultimately against them.
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