United States Court of Appeals
For the First Circuit
No. 07-1605
ALBERTO SAN, INC.,
Plaintiff, Appellant,
v.
CONSEJO DE TITULARES DEL CONDOMINIO SAN ALBERTO; ROBERTO VÉLEZ-
BÁEZ; DANIEL GARAVITO-MEDINA; JOSÉ GONZÁLEZ; JOHN DOE; RICHARD DOE,
Defendants, Appellees.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Francisco A. Besosa, U.S. District Judge]
Before
Torruella, Circuit Judge,
Selya, Senior Circuit Judge,
and Lynch, Circuit Judge.
A.J. Amadeo Murga for appellant.
Andrés W. López for appellees.
March 28, 2008
LYNCH, Circuit Judge. This is an appeal from the
district court's dismissal of plaintiff's complaint for lack of
subject matter jurisdiction.
The complaint was brought by Alberto San, Inc., an owner
of a substantial interest in an office condominium, against the
board and other owners of the condominium. The complaint alleged
that a Puerto Rico statute, which decreased plaintiff's original
voting power in the condominium association, violated plaintiff's
due process rights under the Fifth and Fourteenth Amendments to the
United States Constitution.
The change in voting rights initially resulted from the
enactment of Law 157 in 1976, which abrogated Law 104, on which
plaintiff's claim is based. Under Law 104, voting rights were
assigned by percentage of ownership; Law 157 assigns one vote to
each owner regardless of the owner's share in the condominium.
Further, a statute enacted on July 7, 2003, repeated the relevant
terms of the 1976 statute. Plaintiff filed suit on December 6,
2006, after an April 30, 2004 majority vote of the condominium
association rejected plaintiff's position that a reserve hurricane
fund was no longer needed (because insurance had been purchased)
and should thus be distributed. Plaintiff alleges that if the fund
were distributed, it would be entitled to receive $250,000. This
is based on plaintiff's assertion that most of the present owners
never contributed to the fund.
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Plaintiff's federal court complaint seeks damages of
$500,000, an injunction against the defendants precluding them from
relying on specific provisions of Puerto Rico law, a declaration
that the 1976 and 2003 statutes are unconstitutional, and an
injunction against the condominium association preventing it from
spending funds to defend this case. The complaint sought relief
under 42 U.S.C. § 1983 and 28 U.S.C. § 2201. The complaint also
sought relief for unjust enrichment, presumably under Puerto Rico
law.
On February 21, 2007, plaintiff moved for summary
judgment on its claims. In its summary judgment papers, plaintiff
again argued that the 1976 statute was unconstitutional under the
Due Process Clause. Jurisdiction was asserted under 28 U.S.C. §
1331, which confers federal jurisdiction over "all civil actions
arising under the Constitution, laws, or treaties of the United
States."
Defendants moved to dismiss for lack of subject matter
jurisdiction on March 2, 2007. Defendants argued that the only
basis alleged for a federal claim was a § 1983 action, which must
fail because there was no state action.
In its opposition to the motion to dismiss, plaintiff
argued that the constitutional due process claim based on the
statute was by itself sufficient to invoke federal jurisdiction
under § 1331. As for the § 1983 claim, plaintiff conceded that "we
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have no state actor" but argued that § 1983 still applies when
private parties "act[] pursuant to an unconstitutional statute and
were present [sic] other conditions."
In an unpublished decision, the district court held that
there was no subject matter jurisdiction under § 1331. The court
based that jurisdictional ruling on its determination that
plaintiff had not alleged sufficient facts to establish "state
action" under § 1983, which provides a remedy for deprivations of
federal rights under color of state law.1 Thus, without an
independent cause of action, § 1331 was insufficient to confer
federal jurisdiction. Although the court's decision referenced
both Rule 12(b)(1) (lack of subject matter jurisdiction) and Rule
12(b)(6) (failure to state a claim), it entered a dismissal for
lack of jurisdiction, and did so without prejudice. See Fed. R.
Civ. P. 12(b)(1), (6). While the outcome on appeal is the same,
there are distinctions that should be observed between failure to
state a claim and lack of jurisdiction. We explain.
"Almost by definition, a claim under § 1983 arises under
federal law and will support federal-question jurisdiction [under
§ 1331] . . . ." Local Union No. 12004, United Steelworkers v.
Massachusetts, 377 F.3d 64, 75 (1st Cir. 2004). We would be
1
Section 1983's requirement of action "under color of
state law" is identical to the "state action" requirement of the
Fourteenth Amendment. Lugar v. Edmondson Oil Co., 457 U.S. 922,
929 (1982).
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reluctant to say these § 1983 and state action questions are so
clearly lacking as to make the federal question insubstantial for
jurisdictional purposes. See Penobscot Nation v. Georgia-Pacific
Corp., 254 F.3d 317, 322 (1st Cir. 2001) ("[T]he Supreme Court has
often said that a colorable claim of a federal cause of action will
confer subject matter jurisdiction even though the claim itself may
fail as a matter of law on further examination."). Therefore, the
complaint should not have been dismissed on jurisdictional grounds.
See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89
(1998); 13B Wright & Miller, Federal Practice and Procedure § 3563,
at 49 (2d ed. 1984).
Whether plaintiff adequately pleaded state action for
purposes of stating a claim under § 1983 is a different question,
and one that we reach.2 That question was adequately presented to
the district court and briefed by the parties, so there is no lack
of notice or unfairness in our reaching it.
The district court found no state action because of the
lack of any joint participation by state officials in private
2
In its opposition to the motion to dismiss in the
district court, the plaintiff for the first time made a single
reference to the Contract Clause of the U.S. Constitution, art. I,
§ 10, with no argument presented. The district court opinion was
devoted to the § 1983 state action question and noted that
plaintiff had failed to identify any other basis for federal
jurisdiction.
We reject plaintiff's attempts on appeal to shift its
focus to a Contract Clause analysis under § 1331. The argument
was waived in the district court and we will not entertain it here.
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defendants' conduct. Plaintiff argues that it has sufficiently
pleaded state action by alleging that the defendants were acting
pursuant to an unconstitutional state statute.
The state action requirement has two components: "First,
the deprivation must be caused by the exercise of some right or
privilege created by the State or by a rule of conduct imposed by
the state . . . . Second, the party charged with the deprivation
must be a person who may fairly be said to be a state actor."
Lugar v. Edmondson Oil Co., 457 U.S. 922, 937 (1982).
A complaint satisfies the first component where, as here,
it alleges that defendants were acting pursuant to a state statute
that deprived plaintiff of its rights (here, diluting plaintiff's
property interests by creating greater voting rights in others).
See id. at 941; Estades-Negroni v. CPC Hosp. San Juan Capestrano,
412 F.3d 1, 4 n.10 (1st Cir. 2005). However, satisfaction of that
first component is not sufficient in itself to satisfy the state
action requirement. If it were, "private parties could face
constitutional litigation whenever they s[ought] to rely on some
state rule governing their interactions with the community
surrounding them." Lugar, 457 U.S. at 937.
Turning, as we must, to the second component of the state
action inquiry, a private party can be fairly characterized as a
state actor if the circumstances of the case meet one of three
tests: the public function test, the joint action/nexus test, or
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the state compulsion test. Estades-Negroni, 412 F.3d at 5. The
first is clearly not applicable here, as defendants in managing
their condominium association were not performing "a public
function that has been 'traditionally the exclusive prerogative of
the State.'" Id. (quoting Blum v. Yaretsky, 457 U.S. 991, 1005
(1982)).
The second test applies where private citizens are
"participant[s] in joint activity with the State or its agents."
Lugar, 457 U.S. at 941 (quoting Adickes v. S.H. Kress & Co., 398
U.S. 144, 152 (1970)) (internal quotation marks omitted). The
district court correctly ruled that no such joint participation was
alleged here. Cf. id. at 939 n.21 (disagreeing that "a private
party's mere invocation of state legal procedures constitutes
'joint participation'"). Even if a statute is unconstitutional,
private actions taken pursuant to such a statute may remain
private. Spencer v. Lee, 864 F.2d 1376, 1381 (7th Cir. 1989).
Finally, the state compulsion test considers whether "the
state 'has exercised coercive power or has provided such
significant encouragement, either overt or covert, that the
[challenged conduct] must in law be deemed to be that of the
State.'" Estades-Negroni, 412 F.3d at 5 (quoting Blum, 457 U.S. at
1004). There is no such coercion or significant encouragement
here. In the end, all plaintiff can point to is the existence of
a statute, but that alone is not enough. Wojcik v. Town of North
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Smithfield, 874 F. Supp. 508, 517 (D.R.I. 1995) ("Action by a
private party in compliance with a statute is not sufficient to
justify a characterization of that party as a 'state actor.'").
If the mere existence of a statute were sufficient to
satisfy the second component of the state action inquiry, that
component would merge into the first, but the Supreme Court has
noted that these components are distinct and do not merge when the
defendants are private citizens. See Lugar, 457 U.S. at 937.
Rather, "something more" is required to establish that a private
entity should be considered a state actor. Id. at 939. Since
nothing more was or could be alleged here, the district court was
correct that plaintiff failed to state a claim under § 1983.
With the § 1983 claim set aside, plaintiff is left
without a federal case. Alleging a constitutional wrong is
insufficient to survive a Rule 12(b)(6) motion unless plaintiff can
point to another federal statute or the existence of a federal
common law cause of action. See Corr. Servs. Corp. v. Malesko, 534
U.S. 61, 68 (2001) (noting Court's unwillingness to recognize any
additional common law causes of action for constitutional torts).
Section 1331 extends federal jurisdiction to "those [cases] in
which federal law creates the cause of action," Merrell Dow Pharms.
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Inc. v. Thompson, 478 U.S. 804, 809 (1986);3 it does not itself
provide relief.
The Declaratory Judgment Act, 28 U.S.C. § 2201, gets
plaintiff no further. That Act merely "makes available an added
anodyne for disputes that come within the federal courts'
jurisdiction on some other basis." Ernst & Young v. Depositors
Econ. Prot. Corp., 45 F.3d 530, 534 (1st Cir. 1995); see also
Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950);
Progressive Consumers Fed. Credit Union v. United States, 79 F.3d
1228, 1230 (1st Cir. 1996); McCarthy v. Marshall, 723 F.2d 1034,
1037 (1st Cir. 1983). Thus "[t]here must be an independent basis
of jurisdiction . . . before a federal court may entertain a
declaratory-judgment action." 10B Wright & Miller, Federal
Practice and Procedure § 2766, at 644 (3d ed. 1998). Section 2201
is the cart; plaintiff still needs a horse.
Plaintiff does not allege that the defendants could have
brought a claim raising a federal question, which would allow in
turn the use of § 2201 to establish a federal defense, see id.
§ 2767, at 655 -- nor could it. The Due Process Clause protects
property from wrongful deprivation by public actors, not private;
the closest public action here is the statute's enactment, and the
3
There is a limited exception extending § 1331 coverage to
state law claims involving "contested" and "substantial" federal
issues that implicate "serious federal interest[s]." Grable & Sons
Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 313 (2005).
That exception is exceedingly rare and clearly not applicable here.
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constitutionality of that statute is only tangentially related to
plaintiff's real complaint. In a properly instituted state court
action, this question of constitutionality would arise as a
potential defense, if at all. Cf. Skelly Oil Co., 339 U.S. at 672-
74 (artful pleading anticipating a federal defense is not
sufficient to invoke federal jurisdiction under the Declaratory
Judgment Act).
Given the congressional intent to limit § 1983 claims
brought under federal question jurisdiction to situations of state
action, it would not be appropriate to grant such relief in this
case. As the district court noted and we have discussed, plaintiff
has not alleged any other viable premise on which to bring its
suit. The suit was thus an appropriate candidate for dismissal for
failure to state a claim.
Plaintiff also appeals from the district court's award of
attorneys' fees to defendants. Plaintiff's complaint, though
unsuccessful, was not so "frivolous, unreasonable, or without
foundation" as to warrant an award of attorneys' fees to
defendants. Tang v. R.I. Dep't of Elderly Affairs, 163 F.3d 7, 13
(1st Cir. 1998) (quoting Christianburg Garment Co. v. EEOC, 434
U.S. 412, 421 (1978)). Accordingly, we vacate the fee award.
We thus remand with instructions to revise the judgment
to dismiss the federal claim with prejudice, to dismiss without
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prejudice the Puerto Rico law claim for unjust enrichment, and to
deny the defendants' motion for award of attorneys' fees.
Costs are awarded to the defendants.
So ordered.
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