Caviness v. Horizon Community

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

MICHAEL CAVINESS, 
Plaintiff-Appellant, No. 08-15245
v.
 D.C. No.
CV-07-00635-FJM
HORIZON COMMUNITY LEARNING
CENTER, INC.; LAWRENCE PIERATT, OPINION
Defendants-Appellees.

Appeal from the United States District Court
for the District of Arizona
Frederick J. Martone, District Judge, Presiding

Argued and Submitted
June 9, 2009—San Francisco, California

Filed January 4, 2010

Before: Stephen S. Trott, M. Margaret McKeown, and
Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Ikuta

61
64 CAVINESS v. HORIZON COMMUNITY LEARNING

COUNSEL

David C. Larkin, David. C. Larkin P.C., Tempe, Arizona, for
the appellant.

Sally A. Odegard and Larry J. Wulkan, Holloway, Odegard,
Forrest & Kally, P.C., Phoenix, Arizona, for the appellees.
 CAVINESS v. HORIZON COMMUNITY LEARNING 65
OPINION

IKUTA, Circuit Judge:

This appeal requires us to decide whether a private non-
profit corporation that runs a charter school1 in Arizona was
a state actor under 42 U.S.C. § 1983 when it took certain
employment-related actions with respect to a former teacher,
Michael Caviness. The district court held that Horizon Com-
munity Learning Center (“Horizon”) and its executive direc-
tor, Lawrence Pieratt, were not functioning as state actors in
these circumstances.2 Because the allegations in Caviness’s
complaint are insufficient to raise a reasonable inference that
Horizon was a state actor and thus acted under color of state
law in taking the alleged actions after Caviness was termi-
nated, we affirm the judgment of the district court.

I

Horizon is a private, non-profit corporation that operates a
charter school in Arizona. Because Caviness’s argument is
primarily based on the Arizona statutes and regulations that
authorize and regulate charter schools, we provide a brief
description of the relevant provisions.

A

In Arizona, charter schools are “public school[s] estab-
lished by contract with a district governing board, the state
board of education, or the state board for charter schools . . .
1
Section 15-101(3) of the Arizona Revised Statutes provides:
“Charter school” means a public school established by contract
with a district governing board, the state board of education or
the state board for charter schools pursuant to article 8 of this
chapter to provide learning that will improve pupil achievement.
2
We refer to Pieratt by name when appropriate, and otherwise refer to
defendants collectively as “Horizon.”
66 CAVINESS v. HORIZON COMMUNITY LEARNING
to provide learning that will improve pupil achievement.”
Ariz. Rev. Stat. § 15-101(3) (footnote omitted). Charter
schools “serve as alternatives to traditional public schools” by
“provid[ing] additional academic choices for parents and
pupils,” and they are intended “to provide a learning environ-
ment that will improve pupil achievement.” Id. § 15-181(A).
By contrast, Arizona defines a “private school” as a “nonpub-
lic institution where instruction is imparted.” Id. § 15-
101(19). Charter schools are publicly funded, although they
are authorized to accept private grants and gifts. Id. § 15-
185(D).

A private or public entity seeking to create a charter school
must submit an application and be “sponsored” by either “a
school district governing board, the state board of education
or the state board for charter schools.” Id. § 15-183(C).3 In
turn, “[t]he sponsor of a charter school may contract with a
public body, private person or private organization for the
purpose of establishing a charter school . . . .” Id. § 15-
183(B). The sponsoring entity of a charter school has “over-
sight and administrative responsibility for the charter schools
that it sponsors.” Id. § 15-183(R).

Each charter school must develop a plan for running the
school on a largely autonomous basis. A school’s charter must
specify “a governing body for the charter school that is
3
The statute describes the application process as follows:
The application shall include a detailed business plan for the
charter school and may include a mission statement for the char-
ter school, a description of the charter school’s organizational
structure and the governing body, a financial plan for the first
three years of operation of the charter school, a description of the
charter school’s hiring policy, the name of the charter school’s
applicant or applicants and requested sponsor, a description of the
charter school’s facility and the location of the school, a descrip-
tion of the grades being served and an outline of criteria designed
to measure the effectiveness of the school.
Ariz. Rev. Stat. § 15-183(A).
 CAVINESS v. HORIZON COMMUNITY LEARNING 67
responsible for the policy decisions of the charter school.” Id.
§ 15-183(E)(8). The charter must “include a description of the
charter school’s personnel policies, personnel qualifications
and method of school governance and the specific role and
duties of the sponsor of the charter school.” Id. § 15-183(F).

Charter schools are subject to certain state regulations. The
state’s Department of Education promulgates a list notifying
charter schools of their obligations to comply with specified
federal, state, and local statutes and rules relating to health,
safety, civil rights, and insurance. Id. § 15-183(E)(1). Charter
schools are required to display a United States flag in each
classroom and, for grades 7 through 12, purchase copies of
the Constitution and Bill of Rights. Id. § 15-506. According
to Arizona’s Attorney General, charter schools are deemed to
be “political subdivisions” of the state for purposes of com-
plying with Arizona’s Open Meetings Act. See Ariz. Op. Atty
Gen. No. 195-10, 1995 WL 870820 at *4 (1995). But see Salt
River Pima-Maricopa Indian Cmty. Sch. v. Arizona, 23 P.3d
103, 108 (Ariz. 2001) (holding that the Attorney General’s
conclusion that charter schools were political subdivisions of
the state for purposes of open meeting laws did not influence
the court’s determination that charter schools were not politi-
cal subdivisions of the state for purposes of a federal statute
that limited the amount of federal funds such schools could
receive).

Several Arizona statutes are applicable to charter school
employees. Charter school employees must undergo finger-
printing and background checks, and charter schools may not
employ teachers who have been convicted of certain crimes.
Ariz. Rev. Stat. § 15-183(C)(4). Teachers at charter schools
are also afforded certain benefits. Among other things, “[a]
charter school that is sponsored by a school district governing
board, the state board of education or the state board for char-
ter schools is eligible to participate in the Arizona state retire-
ment system . . . .” Id. § 15-187(C). State retirement benefits
are available to “any person in the employ of . . . a political
68 CAVINESS v. HORIZON COMMUNITY LEARNING
subdivision” of Arizona, id. § 38-701(2), and charter schools
are “a political subdivision of th[e] state for purposes of
[employee retirement eligibility definitions in] title 38, chap-
ter 5, article 2,” id. § 15-187(C).

Except as otherwise specified in Arizona statutes regulating
charter schools, or in the school’s own charter, a charter
school “is exempt from all statutes and rules relating to
schools, governing boards and school districts.” Id. § 15-
183(E)(5). Charter schools are therefore exempt from state
teacher-certification requirements, as well as the statutes gov-
erning dismissal of certified teachers. See id. § 15-531 et seq.

B

Caviness was employed as a high school physical education
teacher, health teacher, and track coach at Horizon for six years.4
In February 2006, a female student filed a grievance against
Caviness alleging that “the student-teacher boundary had been
crossed.” Horizon immediately put Caviness on paid adminis-
trative leave and thereafter initiated an investigation. In
March 2006, the Horizon Board held a hearing regarding the
student’s allegations, at which Horizon, but not Caviness,
questioned the student.

Evidence elicited at the hearing indicated that the female
student and Caviness had been communicating via telephone,
and that “the student had a crush on him.” When the student
learned that Caviness had an adult girlfriend, the student
became upset and retaliated against Caviness by filing the
grievance. The Horizon Board determined that Caviness had
exercised questionable judgment regarding the extent of his
personal communications with the student, and therefore
decided not to renew Caviness’s teaching and coaching con-
4
The underlying facts are taken from Caviness’s complaint, and are pre-
sumed true for purposes of reviewing a Rule 12(b)(6) motion to dismiss.
See, e.g., Marder v. Lopez, 450 F.3d 445, 447 n.1 (9th Cir. 2006).
 CAVINESS v. HORIZON COMMUNITY LEARNING 69
tract. The Board decided to keep Caviness on paid administra-
tive leave until the end of his employment term, which was
in June 2006.

In April 2006, Pieratt wrote a letter to Caviness and sent
copies to the Horizon Board members and the Arizona
Department of Education. Caviness alleges that the letter
“contained numerous false and defamatory statements and
private information which Pieratt misused to purposely place
. . . Caviness in a bad light.” In May 2006, Caviness asked
Pieratt for permission to attend the Arizona state high school
track championship to watch several Horizon students com-
pete, but Pieratt refused to consent.

In July 2006, after the end of his employment term with
Horizon, Caviness applied for a position as a teacher and
coach with Mesa School District. Mesa decided not to hire
him after it asked Pieratt to rate Caviness’s ability and knowl-
edge as a teacher, and Pieratt “declined to rate him since the
[Horizon] Board had taken the action of non-renewing his
contract.” Caviness alleges that Pieratt’s statement to Mesa
was “purposely false and incomplete and was intended to
harm” Caviness, since Pieratt “knew that Caviness had an
excellent 6-year record as a teacher and coach and it was rea-
sonable and appropriate for [Pieratt] to respond accordingly
rather than decline to provide information.”

In August 2006, Caviness’s attorney sent a letter to Horizon
informing it that a Horizon employee had called Caviness a
pedophile. The letter demanded “written representations from
Horizon that it had instructed all of its agents and employees
to cease and desist from making any further false and defama-
tory statements to anyone.” In his reply to this letter, Pieratt
did not address these demands, and Caviness claims that
another Horizon teacher subsequently defamed him by also
calling him a pedophile.

On December 21, 2006, Caviness sent a request to Pieratt
for a name-clearing hearing “arising from defendant’s con-
70 CAVINESS v. HORIZON COMMUNITY LEARNING
duct and/or failure to act subsequent to the March 24, 2006
hearing, and his right [to freedom of] association.” Horizon
did not respond to this request.

C

In March 2007, Caviness filed a complaint under 42 U.S.C.
§ 1983 in district court against Horizon. Caviness alleged that
Horizon, acting under color of state law, deprived Caviness of
his liberty interest in finding and obtaining work without due
process by making “several false statements about” him “in
connection with his employment, which . . . cause[d] serious
damage to Caviness’s standing and associations in [the] com-
munity or, alternatively, imposed on Caviness a stigma . . .
that has . . . interfered with his freedom to take advantage of
other employment opportunities,” without providing Caviness
with notice or a name-clearing hearing. Caviness also alleged
that Horizon violated his First Amendment right to freedom
of association “by ordering him not to freely associate at cer-
tain public events.”5

In an order issued August 31, 2007, the district court sua
sponte raised the question whether Horizon was a state actor
for purposes of § 1983, and directed the parties to submit
memoranda in support of federal subject matter jurisdiction.
The district court subsequently granted Horizon’s motion
requesting that this briefing be treated as a motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6).

On December 17, 2007, the district court granted Horizon’s
motion to dismiss. In its order, the district court rejected Cavi-
ness’s arguments that Horizon was a state actor because of its
statutory characterization as a “public school,” and because it
performed a public function in providing public education.
Because there was “no evidence, with respect to [Caviness’s]
5
Caviness additionally alleged certain state-law causes of action that are
not at issue in this appeal.
 CAVINESS v. HORIZON COMMUNITY LEARNING 71
specific employment claims, that Horizon acted in concert or
conspired with state actors, was subject to government coer-
cion or encouragement, or was otherwise entwined or con-
trolled by an agency of the State,” the district court held that
Horizon was not functioning as a state actor in executing its
employment decisions regarding Caviness.

Caviness brought this timely appeal from the district
court’s order granting Horizon’s motion to dismiss.

II

We review de novo the district court’s conclusion that a
party is not a state actor. Lee v. Katz, 276 F.3d 550, 553 (9th
Cir. 2002). We also review de novo the district court’s dis-
missal of Caviness’s complaint under Rule 12(b)(6) for failure
to state a claim. Winn v. Ariz. Christian Sch. Tuition Org., 562
F.3d 1002, 1007 (9th Cir. 2009). “To survive a motion to dis-
miss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on
its face.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)
(internal quotation marks omitted). “A claim has facial plausi-
bility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Id. at 1949 (internal quota-
tion marks omitted). Although “we must take all of the factual
allegations in the complaint as true, we are not bound to
accept as true a legal conclusion couched as a factual allega-
tion.” Id. at 1949-50. “[C]onclusory allegations of law and
unwarranted inferences are insufficient to defeat a motion to
dismiss for failure to state a claim.” Epstein v. Wash. Energy
Co., 83 F.3d 1136, 1140 (9th Cir. 1996).

III

[1] Section 1983 “provides remedies for deprivations of
rights under the Constitution and laws of the United States
when the deprivation takes place under color of any statute,
72 CAVINESS v. HORIZON COMMUNITY LEARNING
ordinance, regulation, custom, or usage, of any State or Terri-
tory.” Gorenc v. Salt River Project Agric. Improvement &
Power Dist., 869 F.2d 503, 505 (9th Cir. 1989) (internal quo-
tation marks omitted). In order to recover under § 1983 for
conduct by the defendant, a plaintiff must show “that the con-
duct allegedly causing the deprivation of a federal right be
fairly attributable to the State.” Lugar v. Edmonson Oil Co.,
457 U.S. 922, 937 (1982); see also Rendell-Baker v. Kohn,
457 U.S. 830, 838 (1982). The state-action element in § 1983
“excludes from its reach merely private conduct, no matter
how discriminatory or wrongful.” Am. Mfrs. Mut. Ins. Co. v.
Sullivan, 526 U.S. 40, 50 (1999) (internal quotation marks
omitted).

[2] As we have explained, “[s]tate action may be found if,
though only if, there is such a close nexus between the State
and the challenged action that seemingly private behavior
may be fairly treated as that of the State itself.” Villegas v.
Gilroy Garlic Festival Ass’n, 541 F.3d 950, 955 (9th Cir.
2008) (en banc) (citing Brentwood Acad. v. Tenn. Secondary
Sch. Athletic Ass’n, 531 U.S. 288, 295 (2001)). “[C]ourts have
developed a variety of approaches” for determining whether
such a close nexus is present. Lee, 276 F.3d at 554 (noting
that the Supreme Court in Brentwood “list[ed] seven
approaches to the issue”); see id. at 554 n.3; see also Kirtley
v. Rainey, 326 F.3d 1088, 1092 (9th Cir. 2003).

This case presents the special situation of a private non-
profit corporation running a charter school that is defined as
a “public school” by state law. We therefore begin with the
recognition that Arizona has statutorily defined a charter
school as a “public school.” Ariz. Rev. Stat. § 15-101(3).
However, because the conduct of a private corporation is at
issue, our inquiry does not end there. Rather, in answering the
question whether there is a close nexus between the State and
the challenged action, our inquiry “begins by identifying the
specific conduct of which the plaintiff complains.” Sullivan,
526 U.S. at 51 (internal quotation marks omitted); see also
 CAVINESS v. HORIZON COMMUNITY LEARNING 73
Blum, 457 U.S. at 1003 (“Faithful adherence to the ‘state
action’ requirement . . . requires careful attention to the grava-
men of the plaintiff ’s complaint.”). “It is important to identify
the function at issue because an entity may be a State actor for
some purposes but not for others.” Lee, 276 F.3d at 555 n.5
(internal quotation marks and alteration omitted).

Thus, in George v. Pacific-CSC Work Furlough, we con-
sidered the complaint by a custodial staff employee of a pri-
vate entity, Pacific, which had contracted with California to
operate a correctional facility. 91 F.3d 1227, 1230 (9th Cir.
1996). After the custodial employee was terminated, he sued
the private company under § 1983, alleging that his First
Amendment rights were violated because he was terminated
for speaking out about safety and security problems. In reject-
ing the employee’s theory that Pacific was a state actor
because it was “performing and fulfilling a traditional state
and government function, i.e., operating a correctional deten-
tion facility,” we explained that “[t]he relevant inquiry is
whether [Pacific’s] role as an employer was state action” in
the employee’s case, and noted that “[a]n entity may be a state
actor for some purposes but not for others.” Id. (emphasis in
original). We concluded that while “Pacific ha[d] been
granted certain powers and privileges under the law to allow
it to function adequately as a prison,” the plaintiff failed to
show state action because the “complaint offer[ed] no indica-
tion Pacific ha[d] become the government for employment
purposes.” Id. (internal citation, quotation marks, and alter-
ations omitted); see also Cornish v. Corr. Servs. Corp., 402
F.3d 545, 550 (5th Cir. 2005) (in suit by terminated employee
of private prison contractor, question in determining state
action “is whether [defendant] acted under color of state law
in terminating [plaintiff ’s] employment, not whether its pro-
viding juvenile correctional services was state action”).

[3] In this case, Caviness’s complaint objects to Horizon’s
failure to instruct its employees to cease making statements
about Caviness’s performance as a teacher, and its refusal to
74 CAVINESS v. HORIZON COMMUNITY LEARNING
provide him with a name-clearing hearing. The complaint also
objects to Horizon’s order forbidding Caviness from having
contact with students during the paid administrative leave
period. All these actions were taken by Horizon in connection
with its role as Caviness’s employer, and therefore the rele-
vant inquiry in this case is whether Horizon’s role as an
employer was state action. George, 91 F.3d at 1230.

[4] In determining whether Caviness’s factual allegations
“plausibly give rise to an entitlement to relief,” Iqbal, 129 S.
Ct. at 1950, we are limited to the pleadings in the complaint.
With respect to Caviness’s claim that Horizon’s actions in its
role as his employer constituted state action, Caviness’s com-
plaint alleges only that Horizon is a non-profit corporation,
“an Arizona charter school[,] and [an] Arizona public school
operating in Maricopa County,” and that Pieratt was acting as
president, CEO, or executive director of Horizon. Caviness
does not argue that the facts alleged in his complaint render
Horizon a state actor. Rather, he argues that under Arizona’s
statutory scheme, all charter schools are, as a matter of law,
state actors. Therefore, Caviness’s appeal must fail unless
being an Arizona charter school is, by that fact alone, suffi-
cient to make Horizon the government for employment pur-
poses.

A

Caviness first argues that under the statutory and regulatory
structure in Arizona, a charter school is a state actor for all
purposes, including employment purposes, as a matter of law.
Caviness first relies on the fact that Arizona statutes designate
charter schools as “public schools,” Ariz. Rev. Stat. § 15-
101(3), to argue that they provide “public educational ser-
vices” as a matter of law. Further, he notes that the Arizona
Attorney General has concluded that charter school board
meetings are subject to Arizona’s Open Meetings Act. See
Ariz. Op. Atty Gen. No. 195-10, 1995 WL 870820, at *4.
 CAVINESS v. HORIZON COMMUNITY LEARNING 75
[5] We disagree. Under § 1983, a state’s statutory charac-
terization of a private entity as a public actor for some pur-
poses is not necessarily dispositive with respect to all of that
entity’s conduct. See Jackson v. Met. Edison Co., 419 U.S.
345, 350 & n.7 (1974) (statutory designation of utility as
“public utility” insufficient to make utility a state actor).
Rather, a private entity may be designated a state actor for
some purposes but still function as a private actor in other
respects. See Gorenc, 889 F.2d at 507 (holding that an entity
designated as a “political subdivision” in the state constitution
was not a state actor where the entity, “in the hiring and firing
of its employees . . . acts as a private company, that is, in a
proprietary manner not in a governmental manner”). Accord-
ingly, Caviness’s reliance on Arizona’s statutory characteriza-
tion of charter schools as “public schools” does not itself avail
him in the employment context. For the same reason, the
opinion of the Attorney General that charter school boards are
“political subdivisions” for purposes of Arizona’s Open Meet-
ings Act does not help Caviness here. See id.; see also Salt
River, 23 P.3d at 108 (holding that Arizona charter schools
were not political subdivisions for certain federal funding pur-
poses). Caviness raises the similar argument that a charter
school is a state actor under § 1983 because, in Greater
Heights Academy v. Zelman, 522 F.3d 678 (6th Cir. 2008), the
Sixth Circuit held, “[a]fter considering Ohio’s statutory and
case law,” that Ohio charter schools are a political subdivision
of Ohio for purposes of determining whether the schools
could sue the state under the Fourteenth Amendment. Id. at
680. This conclusion tells us nothing about Arizona’s charter
school system, however, and so it does not support Caviness’s
position. Moreover, even if we had determined that an Ari-
zona charter school was a political subdivision of Arizona for
purposes of suits under the Fourteenth Amendment, such a
determination would not resolve the question whether the
state “was sufficiently involved in causing the harm to plain-
tiff” such that we should treat Horizon as acting under color
of state law. Gorenc, 869 F.2d at 506.
76 CAVINESS v. HORIZON COMMUNITY LEARNING
B

[6] Second, Caviness argues that Horizon is a state actor
because it provides a public education, a function that is “tra-
ditionally and exclusively the prerogative of the state.” Courts
have “found state action present in the exercise by a private
entity of powers traditionally exclusively reserved to the
State.” Jackson, 419 U.S. at 352. In these cases, “private indi-
viduals or groups are endowed by the State with powers or
functions governmental in nature” such that “they become
agencies or instrumentalities of the State.” Lee, 276 F.3d at
554-55 (quoting Evans v. Newton, 382 U.S. 296, 299 (1966)).
The challenged “function at issue must be both traditionally
and exclusively governmental.” Id. at 555; see also Johnson
v. Knowles, 113 F.3d 1114, 1118 (9th Cir. 1997) (discussing
as state action the exercise of those powers that have been
“recognized as traditionally exclusively sovereign”).

Caviness argues that since charter schools are “public
schools” under Arizona law, they therefore engage in the pro-
vision of “public educational services,” which he distin-
guishes from the provision of the “educational services” that
the Supreme Court held is not the exclusive and traditional
province of the state. Rendell-Baker, 457 U.S. at 842. Cavi-
ness reasons that “education in general” can be provided by
anyone, while “public educational services” are traditionally
and exclusively the province of the state.

This argument is foreclosed by Rendell-Baker. In that case,
the Supreme Court addressed the question whether a private
school that was almost wholly state-funded could be consid-
ered a state actor for purposes of § 1983. See id. A Massachu-
setts statute provided that the state could “enter into an
agreement with any public or private school, agency, or insti-
tution to provide the necessary special education” to identified
students. Id. at 832 n.1. The school, a non-profit organization
which specialized “in dealing with students who have experi-
enced difficulty completing public high schools,” was
 CAVINESS v. HORIZON COMMUNITY LEARNING 77
“founded as a private institution” and operated by a board of
directors who were neither public officials nor chosen by pub-
lic officials. Id. at 832. Nearly all of the students in the school
had been referred to the school by the state, and the school’s
diplomas were publicly certified. Id. The tuition of state-
referred students was publicly funded, and public funds
accounted for 90 to 99 percent of the school’s operating bud-
get. Id.

[7] A former teacher sued the school under § 1983 alleging
deprivations of her First, Fifth, and Fourteenth Amendment
rights when her employment was terminated after a dispute
with the school’s board of directors. Id. at 835. In evaluating
“whether the school’s action in discharging [plaintiff] can
fairly be seen as state action,” id. at 838, the Court considered
whether the school was performing a public function that has
“been ‘traditionally the exclusive prerogative of the State,’ ”
id. at 842 (emphasis in original) (quoting Jackson, 419 U.S.
at 353). Although the school provided a public function by
educating “students who could not be served by traditional
public schools,” the Court held that the “legislative policy
choice” to provide those services at public expense “in no
way” made their provision “the exclusive province of the
State.” Id.

[8] Like the private organization running the school in
Rendell-Baker, Horizon is a private entity that contracted with
the state to provide students with educational services that are
funded by the state. The Arizona statute, like the Massachu-
setts statute in Rendell-Baker, provides that the sponsor “may
contract with a public body, private person or private organi-
zation for establishing a charter school,” Ariz. Rev. Stat. § 15-
183(B), to “provide additional academic choices for parents
and pupils . . . [and] serve as alternatives to traditional public
schools,” id. § 15-181(A). The Arizona legislature chose to
provide alternative learning environments at public expense,
but, as in Rendell-Baker, that “legislative policy choice in no
way makes these services the exclusive province of the State.”
78 CAVINESS v. HORIZON COMMUNITY LEARNING
457 U.S. at 842. Merely because Horizon is “a private entity
perform[ing] a function which serves the public does not
make its acts state action.” Id.; see also Johnson v. Pinkerton
Acad., 861 F.2d 335, 338 (1st Cir. 1988) (“Granted that the
state requires that its children, to a certain age, be educated,
even to the extent of assuming full tuition cost of all who do
not voluntarily pay their own way, it does not follow that the
mechanics of furnishing the education is exclusively a state
function.”).

[9] Caviness’s argument that Rendell-Baker does not con-
trol this case since the school there was private, whereas here
Horizon is a public school as a matter of Arizona law, merely
restates his erroneous argument that the state’s statutory char-
acterization is necessarily controlling.6 Accordingly, we con-
clude that Horizon’s provision of educational services is not
a function that is traditionally and exclusively the prerogative
of the state, and therefore is not a basis for holding that Hori-
zon acted under color of state law in taking the alleged actions
relating to Caviness’s employment.

C

Caviness alternatively argues that Horizon is a state actor
because Arizona regulates the personnel matters of charter
schools.

[10] This argument also fails. A state may be responsible
for a private entity’s actions if “it has exercised coercive
power or has provided such significant encouragement, either
overt or covert, that the choice must in law be deemed to be
6
Caviness does not expressly argue that Horizon is a state actor by vir-
tue of “public entwinement in the management and control of ostensibly
separate trusts or corporations.” Brentwood Acad., 531 U.S. at 296. Such
an argument in this case would fail, as the complaint is devoid of allega-
tions that any state actors were involved in Horizon’s governing board, or
that Horizon’s sponsor played any role in the employment decisions of the
school.
 CAVINESS v. HORIZON COMMUNITY LEARNING 79
that of the State.” Blum v. Yaretsky, 457 U.S. 991, 1004
(1982) (citing cases). The Supreme Court has repeatedly held
that “the mere fact that a business is subject to state regulation
does not by itself convert its action into that of the State.” Sul-
livan, 526 U.S. at 52 (alteration omitted) (quoting Jackson,
419 U.S. at 350). Even extensive government regulation of a
private business is insufficient to make that business a state
actor if the challenged conduct was “not compelled or even
influenced by any state regulation.” Rendell-Baker, 457 U.S.
at 841-42; see also Morse v. N. Coast Opportunities, Inc., 118
F.3d 1338, 1342 (9th Cir. 1997) (extensive federal regulation
specifying who had responsibility for school’s employment
decisions insufficient to create state action because the regula-
tions included “no substantive standard” or “procedural
guidelines” that could have guided, compelled, or influenced
employment decisions).

Citing section 15-187 of the Arizona Revised Statutes,
Caviness contends that charter schools are state actors
because charter school teachers have the same legal rights in,
and to, their teaching jobs as teachers in the public school dis-
tricts. See Ariz. Rev. Stat. § 15-531 et seq.7 This argument is
7
For the first time on appeal, Caviness alleges that he was a tenured cer-
tified teacher entitled to the due process rights set forth in Arizona’s stat-
utes. See Ariz. Rev. Stat. § 15-531 et seq.; id. § 15-539, 540, 541.
Although his complaint does not include such an allegation, Caviness
argues that we should infer that he held this status from the allegations in
the complaint stating that he had an employment contract with a specified
term, he was given a hearing by Horizon, and he was placed on paid
administrative leave after the hearing—requirements that are also man-
dated under Arizona law for tenured certificated teachers. See id. §§ 15-
539–541. Although Caviness’s argument is not entirely clear, he appears
to argue that once we draw the factual inference that he was a certified
tenured teacher, we must also draw the legal conclusion that Horizon was
a state actor with statutory and constitutional due process obligations. The
fact that Horizon implemented certain employment procedures in Cavi-
ness’s case does not, without more, give rise to the inference that Caviness
had a state-recognized status that gave him legal and constitutional entitle-
ments to such procedures, or to further the inference that Horizon was
legally obligated to provide them. Accordingly, we decline to make such
inferences here. Iqbal, 129 S.Ct. at 1949 (holding that “mere conclusory
statements” are not enough to survive a motion to dismiss).
80 CAVINESS v. HORIZON COMMUNITY LEARNING
erroneous and appears to be based on a misreading of section
15-187(A), which provides those rights only to a school dis-
trict teacher who was previously a charter school teacher “on
th[at] teacher’s return to the school district.”8

[11] Specifically, section 15-187(B)9 gives hiring priority to
teachers who have moved from a public school district to a
charter school and who seek to return to the same public
school district. Therefore, sections 15-187(A) and (B) ensure
that the teacher receives preference when reapplying to his or
her prior public school district without a reduction in senior-
ity, certification, or benefits provided to employees by the
public school district. This in no way suggests that the gov-
ernment controls or influences post-termination decisions
made by Horizon. In fact, Horizon is expressly “exempt from
all statutes and rules relating to schools, governing boards and
school districts,” id. § 15-183(E)(5), which include the right
to a hearing after dismissal provided by section 15-541. The
absence of any reference to charter schools in the statutory
sections governing certified teachers’ employment rights fur-
ther supports our conclusion. See id. § 15-501 et seq.

[12] Caviness also argues that Horizon is a state actor
because, under Arizona law, charter schools (but not tradi-
tional private schools) are permitted to participate in the
8
Section 15-187(A) states in full:
A teacher who is employed by or teaching at a charter school and
who was previously employed as a teacher at a school district
shall not lose any right of certification, retirement or salary status
or any other benefit provided by law, by the rules of the govern-
ing board of the school district or by the rules of the board of
directors of the charter school due to teaching at a charter school
on the teacher’s return to the school district.
9
Section 15-187(B) provides in pertinent part that “[a] teacher who is
employed by or teaching at a charter school and who submits an employ-
ment application to the school district where the teacher was employed
immediately before employment by or at a charter school shall be given
employment preference by the school district.”
 CAVINESS v. HORIZON COMMUNITY LEARNING 81
state’s retirement system. See id. § 15-187(C). We are not
persuaded. Permitting charter schools to participate in the
state’s retirement plan provides additional compensation to
entities that operate charter schools by relieving them from
pension or retirement obligations they might otherwise face.
The Supreme Court, as well as case law in this and our sister
circuits, permits the state to “subsidize[ ] the operating and
capital costs” of a private entity without converting its acts
into those of the state. Rendell-Baker, 457 U.S. at 840; see
also, e.g., Morse, 118 F.3d at 1342; Pinkerton Acad., 861
F.2d at 339 (state’s act of permitting private school to partici-
pate in public retirement program “would be no more than the
equivalent of additional compensation to defendant for its
teaching services by relieving defendant of pension obliga-
tions”).

[13] Nor does the fact that Horizon’s sponsor has the
authority to approve and review the school’s charter, which
includes Horizon’s self-created personnel policies and method
of governance, change our decision. This type of regulation
does not constitute state action because “[a]ction taken by pri-
vate entities with the mere approval or acquiescence of the
State is not state action.” Sullivan, 526 U.S. at 52; see also
Jackson, 419 U.S. at 357; Morse, 118 F.3d at 1342 (citing
cases). Even when the state has the power “initially to review
the qualifications of a[n employee] selected by the school,”
such regulation is not sufficient to make the school’s
employment-related actions those of the state. Rendell-Baker,
457 U.S. at 838 n.6, 841-42; see also George, 91 F.3d at 1231
(holding that termination was not state action even though the
state “retain[ed] the right to dismiss” the employee, because
the state had “neither legally regulated nor contractually spec-
ified the manner in which [the private actor] disciplines or ter-
minates its own employees”).

Caviness does not argue, nor does the complaint allege, that
the state was involved in the contested employment actions,
or that it showed any “interest in the school’s personnel mat-
82 CAVINESS v. HORIZON COMMUNITY LEARNING
ters.” Rendell-Baker, 457 U.S. at 841. None of the regulations
cited by Caviness contains substantive standards or proce-
dural guidelines that “could have compelled or influenced”
Horizon’s actions. Morse, 118 F.3d at 1342. Ultimately, Hori-
zon’s actions and personnel decisions were “made by conced-
edly private parties, and turn[ed] on judgments made by
private parties without standards established by the State.”
Sullivan, 526 U.S. at 53 (internal quotation marks and alter-
ations omitted).

IV

[14] Because the allegations in Caviness’s complaint are
insufficient to raise a reasonable inference that Horizon was
a state actor and thus acted under color of state law in taking
the alleged actions after Caviness was terminated, we affirm
the judgment of the district court. Caviness’s motion for attor-
neys’ fees under 42 U.S.C. § 1988 is denied.

AFFIRMED.