48
Opinion of the Court
phia (which self-insures), and a number of private insurance companies who provide workers' compensation coverage in Pennsylvania. Respondents alleged that in withholding workers' compensation benefits without predeprivation notice and an opportunity to be heard, the state and private defendants, acting "under color of state law," deprived them of property in violation of due process. Amended Complaint ¶¶ 265-271, App. 43-44. They sought declaratory and injunctive relief, as well as damages.
The District Court dismissed the private insurers from the lawsuit on the ground that they are not "state actors," Sullivan v. Barnett, 913 F. Supp. 895, 905 (ED Pa. 1996), and later dismissed the state officials who remained as defendants, as well as the school district, on the ground that the Act does not violate due process, App. to Pet. for Cert. 71a.
The Court of Appeals for the Third Circuit disagreed on both issues. 139 F. 3d 158 (1998). It held that a private insurer's decision to suspend payment under the Act—what the court called a "supersedeas"—constitutes state action. The court reasoned:
"In creating and executing this system of entitlements, the [State] has enacted a complex and interwoven regulatory web enlisting the Bureau, the employers, and the insurance companies. The [State] extensively regulates and controls the Workers' Compensation system. Although the insurance companies are private entities, when they act under the construct of the Workers' Compensation system, they are providing public benefits which honor [s]tate entitlements. In effect, they become an arm of the State, fulfilling a uniquely governmental obligation under an entirely state-created, self-contained public benefit system. . . .
"The right to invoke the supersedeas, or to stop payments, is a power that traditionally was held in the hands of the State. When insurance companies invoke the supersedeas (i. e., suspension) of an employee's medi-
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