Barrios-Velazquez v. Asociacion De Empleados Del Estado Libre Asociado De Puerto Rico

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 95-2170

ELIEZER BARRIOS-VELAZQUEZ, ET AL.,

Plaintiffs - Appellants,

v.

ASOCIACION DE EMPLEADOS DEL
ESTADO LIBRE ASOCIADO DE PUERTO RICO, ET AL.,

Defendants - Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Salvador E. Casellas, U.S. District Judge]

Before

Torruella, Chief Judge,

Coffin, Senior Circuit Judge,

and Cyr, Circuit Judge.

Francisco R. Gonz lez-Col n, with whom Francisco R. Gonz lez

Law Firm was on brief for appellants.

Lino J. Salda a, with whom Carmen M. Dom nguez was on brief

for appellees.

May 24, 1996

TORRUELLA, Chief Judge. Appellants Eliezer Barrios-
TORRUELLA, Chief Judge.

Vel zquez ("Barrios"), Myrta Nieves-Vega ("Nieves") and Isidro

Collazo ("Collazo"), in their personal capacity and as

representatives of the "Comit de Delegados y Miembros Pro Sana

Administraci n de AEELA" ("SAAEELA") (collectively,

"Plaintiffs"), appeal the district court's dismissal for lack of

subject matter jurisdiction of their complaint brought pursuant

to 42 U.S.C. 1983 against the Asociaci n de Empleados del

Estado Libre Asociado de Puerto Rico ("AEELA") and Isaac Neftal

Rojas-Nater ("Rojas"), Roberto Aquino-Garc a ("Aquino") and

Miguel Mart nez-Williams ("Mart nez"), in their personal and

official capacities (collectively, "Defendants"). We affirm the

decision of the district court.

I. STANDARD OF REVIEW
I. STANDARD OF REVIEW

"We review the grant of a motion to dismiss de novo,

taking the allegations in the complaint as true and making all

reasonable inferences in favor of plaintiff." Rockwell v. Cape

Cod Hosp., 26 F.3d 254, 256 (1st Cir. 1994); see Rumford

Pharmacy, Inc. v. City of E. Providence, 970 F.2d 996, 997 (1st

Cir. 1992). "We must liberally construe [Plaintiffs'] complaint

and affirm its dismissal only if [they] cannot prove any set of

facts entitling [them] to relief." Rockwell, 26 F.3d at 255.

Although it does not affect the outcome, it would

appear that the motion to dismiss was converted to a motion for

summary judgment since the district court plainly considered

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"matters outside the pleadings." Fed. R. Civ. P. 12(c).1

Plaintiffs in fact argue in their brief that due to

representations made to them by defendants' attorney, they

postponed filing an opposition to defendants' motion to dismiss,

and they were therefore not afforded a "reasonable opportunity"

to present Rule 56 material. See Br. for Appellants at 12. The

answer to this argument, of course, is clear: even considering

this Rule 56 material, see supra note 1, we conclude that

plaintiffs demonstrated no genuine issue of material fact.

II. BACKGROUND
II. BACKGROUND

The instant case stems from a dispute over the

circumstances under which a Quadrennial Assembly (the "Assembly")

of the AEELA was held on July 8, 1995. The AEELA has

approximately 180,000 members, all of whom are regular or former

employees of the government of Puerto Rico. Of these members,

1 These "matters" included the following: 1) the AEELA was
created as a quasi-public entity to provide financial services to
government employees, which is a traditional government function;

2) membership in the AEELA is mandatory for most Commonwealth
employees as is the 3% payroll deduction to fund the AEELA's
operations; 3) the AEELA's operations and delegate elections are
heavily regulated by statute (e.g., number of members per
delegate); 4) heads of government departments appoint the
Election Committee to run the delegate elections; 5) the Board of
Directors and the Election committee members often work on
government time, and use government facilities and equipment; 6)
the AEELA's finances are supervised by the Commonwealth's
Comptroller; 7) the AEELA is exempt from state taxation; 8) the
Commonwealth collects the 3% membership fee for the AEELA by
making payroll deductions; 9) the AEELA may make investments only
"on advice" from the Commonwealth's Treasury Department; 10) the
AEELA's employees participate in the Commonwealth government's
pension plan; 11) the Commonwealth provides the AEELA with some
services free of charge; and 12) the AEELA's members, delegates,
and directors are all government employees.

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75% are required by law to participate in and be members of the

AEELA, and are required to provide 3% of their salary to be

administered by the AEELA. Only employees of public corporations

and municipalities may participate in the AEELA.

Plaintiffs contend, and this court must assume, given

our procedural posture, that Defendants have exercised control

over the AEELA since 1987, and used this control to handpick

delegates to the Assembly in question in order to maintain their

control, and that of the Popular Democratic Party ("PDP"), over

the AEELA. We must further infer that Defendants impermissibly

notified only those delegates who shared their political beliefs

that the Assembly would be held, and refused to take the

necessary measures to notify or confirm the membership of

delegates who do not support the PDP. Furthermore, we infer that

Defendants denied Plaintiff-Appellant Nieves a list of the

certified delegates, thus hindering her candidacy for President

of the AEELA's Board of Directors.

Plaintiffs charge that these actions amount to illegal

political discrimination in violation of their rights under the

Due Process Clause of the Fourteenth Amendment and the enabling

law of the Commonwealth Employees Association, 3 L.P.R.A.

862(b). They also contend, contrary to the district court

opinion dismissing their claim under 28 U.S.C. 1983, that the

acts of Defendants are state action.

III. DISCUSSION
III. DISCUSSION

"Title 42 U.S.C. 1983 provides a remedy for

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deprivations of rights secured by the Constitution and laws of

the United States when that deprivation takes place 'under color

of any statute, ordinance, regulation, custom, or usage, of any

State or Territory . . . .'" Rockwell, 26 F.3d at 256 (quoting

Lugar v. Edmondson Oil Co., 457 U.S. 922, 924 (1982)). To state

a claim under 1983, a plaintiff must make two showings: the

existence of a federal or statutory right; and a deprivation of

that right by a person acting under color of state law.2 See

id.; Watterson v. Page, 987 F.2d 1, 7 (1st Cir. 1993).

The district court addressed only the second showing,

dismissing this action on the ground that Defendants did not act

under color of state law when they scheduled the general assembly

for July 8, 1995. We note in passing that at least two courts

have already concluded that the AEELA is not an agency,

department or instrumentality of the Government of Puerto Rico,

suggesting that the AEELA's actions and those of its members

cannot be labeled state action. Morales v. Chaves, No. 75-1087,

slip op. at 2 (D.P.R. Dec. 9, 1975) (noting that while "[i]t is

true that the Association was created by statute and only

government employees may be members . . . there all relation with

the Commonwealth ceases"); Association of Employees of Puerto

Rico v. V squez-P rez, 92 JTS 52, slip op. at 26 (P.R. 1992)

2 For the purposes of section 1983, "Puerto Rico enjoys the
functional equivalent of statehood," and thus the term "state
law" includes Puerto Rico law. Mart nez v. Col n, 54 F.3d 980,

984 (1st Cir. 1995); see Playboy Enters., Inc. v. Public Serv.

Comm'n of P.R., 906 F.2d 25, 31 n.8 (1st Cir.), cert. denied, 498

U.S. 959 (1990).

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(official trans.) (stating, in the context of deciding whether

the AEELA was subject to the Truth in Lending Act, that "although

the Association is a highly regulated entity created by the

government, whose objective is to implement the government policy

of . . . encouraging saving among public employees . . . it

cannot be considered as a government agency, department,

instrumentality or public corporation"). While persuasive as to

certain points, these cases do not represent binding authority

for this court. As a result, like the district court before us,

we conduct our own inquiry into the issue.

Because section 1983 does not reach private actions,

the key issue before us is whether the conduct at issue in this

case may be "'fairly attributable to the State,'" Rodr guez-

Garc a v. D vila, 904 F.2d 90, 94 (1st Cir. 1990) (quoting Lugar,

457 U.S. at 937); see Ponce v. Basketball Fed'n of Puerto Rico,

760 F.2d 375, 377 (1st Cir. 1985). The state action inquiry is

"'necessarily fact-bound.'" Id. (quoting Lugar, 457 U.S. at

937). "In cases under 1983, 'under color' of law has

consistently been treated as the same thing as the 'state action'

required under the Fourteenth Amendment." Rendell-Baker v. Kohn,

457 U.S. 830, 838 (1982). "The ultimate issue in determining

whether a person is subject to suit under 1983 is the same

question posed in cases arising under the Fourteenth Amendment:

is the alleged infringement of federal rights 'fairly

attributable to the State?'" Id. (quoting Lugar, 457 U.S. at

937).

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On appeal, Plaintiffs contend that the AEELA is an

extension of the government of the Commonwealth of Puerto Rico,

and that the conduct at issue may be fairly attributed to the

state on that basis as direct state action. Alternatively,

Plaintiffs argue that even if the AEELA is a private

organization, the actions that give rise to the instant case may

still be fairly attributed to the state as indirect state action.

Ultimately, a finding of either direct or indirect state action

would suffice to sustain Plaintiffs' section 1983 action. See

Rodr guez-Garc a, 904 F.2d at 95.

A. Direct State Action
A. Direct State Action

Plaintiffs contend that Defendants' actions may be

fairly attributed to the state because, they claim, the AEELA is

a public corporation and therefore, an "arm of the state."

Although "[t]he Act which creates the Association does not define

whether it is an agency, a department, an instrumentality or a

public corporation," V squez-P rez, slip op. at 24, both federal

and state courts have held that the AEELA is not a governmental

agency, see Morales, slip op. at 2 (noting that "the Supreme

Court of Puerto Rico has, since 1932, consistently ruled that the

Employees Association is not a part of the Government"); V squez-

P rez, slip op. at 26.

Admittedly, technical labels are not dispositive. In

Lebr n v. National R.R. Passenger Corp., U.S. , 115 S. Ct.

961 (1995), the Supreme Court addressed direct state action and

technical labels, ruling that, despite a statutory disclaimer of

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agency status, the National Railroad Passenger Corp. ("Amtrak")

was nonetheless a government entity. In deciding that Amtrak was

a state actor when it refused to lease advertising space to an

artist's display because it was "political," the Court stated

that "it is not for Congress to make the final determination of

Amtrak's status as a government entity for purposes of

determining the constitutional rights of citizens affected by its

actions." Id. at 971. The Court, in dicta, indicated that the

issue of state action and technical labels that it was addressing

also had relevance to the states, stating that "it cannot be that

government, state or federal, is able to evade the most solemn

obligations imposed in the Constitution by simply resorting to

the corporate form [since] [o]n that thesis, Plessy v. Ferguson

can be resurrected by the simple device of having the State of

Louisiana operate segregated trains through a state-owned

Amtrak." Id. at 972 (citations omitted).

While the logic of Lebr n applies to the present case,

we conclude that it does not avail Plaintiffs. The Court held

that where

the Government creates a corporation by
special law, for the furtherance of
governmental objectives, and retains for
itself permanent authority to appoint a
majority of the directors of that
corporation, the corporation is part of
the Government for purposes of the First
Amendment.

Id. at 974-75. The Supreme Court in Lebr n focused on the degree

of control that the federal government had over Amtrak. In

contrast, neither party in the instant case has contended that

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the Government of Puerto Rico has retained permanent authority

over the directors of the AEELA. This distinction becomes

clearer when we compare the facts surrounding Amtrak and the

AEELA. The President appoints the majority of Amtrak's

directors, the federal government owns all of Amtrak's voting

stock, and the government subsidizes Amtrak's "perennial losses."

Id. at 967. By contrast, the government of Puerto Rico does not

retain the power to appoint any of the AEELA's directors.

Instead, the directors are elected by delegates who themselves

are elected by the AEELA's membership at large. Furthermore, the

AEELA's losses, if any, are not regularly subsidized by the

government of Puerto Rico. As a result of these facts, we

conclude that the AEELA does not constitute an extension of the

government of Puerto Rico, and so Defendants must be treated as

private parties. Thus, direct state action is not present in

this case.

B. Indirect State Action
B. Indirect State Action

We therefore turn to the question of whether the

conduct at issue, while not that of the government of Puerto Rico

directly, may be nonetheless fairly attributed to the state. A

private entity's conduct is not actionable under section 1983 if

the challenged action results from the exercise of private choice

and not from state influence or coercion. See id. at 980

(O'Connor, J., dissenting) (concluding that Lebr n did not

involve direct state action, and therefore, unlike the majority,

inquiring as to indirect state action); San Francisco Arts &

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Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522, 547

(1987) (stating that "[t]here is no evidence that the Federal

Government coerced or encouraged the USOC in the exercise of its

right [to deny use of its copyright]"); Rendell-Baker, 457 U.S.

at 841 (holding that discharge decisions of largely publicly-

funded private school for troubled students were not subject to

constitutional challenge because those actions "were not

compelled or even influenced by any state regulation").

As a result, this court must determine whether the

conduct of Defendants, as private parties, rises to the level of

state action. As this court has previously spelled out, the

relevant inquiries consist of whether there was

(1) . . . an elaborate financial or
regulatory nexus between [Defendants] and
the government of Puerto Rico which
compelled [Defendants] to act as they
did, (2) an assumption by [Defendants] of
a traditional public function, or (3) a
symbiotic relationship involving the
sharing of profits.

Rodr guez-Garc a, 904 F.2d at 96; see Ponce, 760 F.2d at 377. We

examine each test in turn, as satisfaction of any one of the

three tests requires that we find indirect state action.

1. Nexus Analysis
1. Nexus Analysis

As both parties acknowledge, "the challenged action of

the regulated entity . . . may be fairly treated as that of the

State itself . . . only when it can be said that the State is

responsible for the specific conduct of which the plaintiff

complains." Blum v. Yaretsky, 457 U.S. 991, 1004 (1982), cited

in Rodr guez-D vila, 904 F.2d at 97. The test is whether the

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government exercised coercive power or provided such significant

encouragement that the complained-of misconduct surrounding the

Assembly and the Board elections must be deemed to be the conduct

of the government. Id., 904 F.2d at 90.

We emphasize that our examination focuses on the

government's connection to the complained-of action, not the

government's connection to the AEELA itself. See Blum, 457 U.S.

at 1004. As a result, we find extraneous Plaintiffs' arguments

highlighting the facts that the AEELA was created by law, that

its members and Directors are public employees, and that the

elective process is regulated by law, except to the degree that

these facts demonstrate government coercion or encouragement of

the complained-of conduct.

Plaintiffs contend that Defendants derived their

authority to schedule the Assembly and election from a Puerto

Rico law, 3 L.P.R.A. 862(d), and that Defendants were

government employees who performed their duties during working

time and using government equipment and materials. However,

Plaintiffs have hung their claim on the proposition that state-

granted authority suffices to find state action, since they have

failed to allege that the government coerced or encouraged the

specific election rigging that gives rise to their complaint. We

believe that the state's grant of authority alone cannot justify

a conclusion of state action in this case.

We draw this conclusion by comparing two of our

previous cases. First, like the district court, we are persuaded

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by our holding in Rockwell, 26 F.3d at 258, that state-granted

authority making possible a private party's actions does not,

without more, sufficiently show that the specific action taken

under that authority constitutes state action. Id. In Rockwell,

we concluded that the fact that a Massachusetts statute

authorized public health professionals to hospitalize persons

believed to present a likelihood of serious harm by reason of

mental illness, did not suffice to create a sufficient link

between the state and the plaintiff's own detention to classify

the hospital as a state actor. Id. By contrast, in Rodr ques v.

Furtado, 950 F.2d 805, 814 (1st Cir. 1991), we held that a

physician "functioned as a state actor" where he performed a body

cavity search of the plaintiff pursuant to a search warrant. We

justified our conclusion on the ground that the scope and

motivation for the specific conduct occasioning the complaint

"were established solely by the state's investigatory goals and

justified solely by the search warrant." Id. at 814.

We conclude that to the extent that state-granted

authority can justify a finding of state action, that authority

must be connected to the aim of encouraging or compelling the

specific complained-of conduct. Because we conclude that the

district court correctly found that no state-linked financial or

regulatory nexus compelled Defendants to act as they did, we find

no state action under the nexus test.

2. Traditional Public Function Analysis
2. Traditional Public Function Analysis

"[F]or a private actor to be deemed to have acted under

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color of state law, it is not enough to show that the private

actor performed a public function." Rockwell, 26 F.3d at 258.

Rather, "[t]he plaintiff must show that the private entity

assumed powers 'traditionally exclusively reserved to the

State.'" Id. (quoting Rodr ques, 950 F.2d at 813). The

exclusive function test screens for situations "where a state

tries to escape its responsibilities by delegating them to

private parties." Id. at 258; see Johnson v. Pinkerton Academy,

861 F.2d 335, 338 (1st Cir. 1988). If the convening of the

AEELA's assembly or the election of its board are traditional,

exclusively sovereign functions which have merely been delegated

to private actors, then the state cannot escape responsibility

for constitutional deprivations caused by private parties acting

pursuant to the delegation. Rockwell, 26 F.3d at 258.

In Rendell-Baker, 457 U.S. at 352, the Supreme Court

discussed the "public function" analysis of state action. The

Court concluded that although the education of maladjusted high

school students is a public function for which the state intends

to provide services at public expense, that "legislative policy

choice in no way makes these services the exclusive province of

the State . . . . That a private entity performs a function which

serves the public does not makes its acts state action." Id.;

see also Ponce, 760 F.2d at 381.

Plaintiffs contend that for public interest purposes,

the government of Puerto Rico has delegated to the AEELA the

traditional activity of promoting savings among government

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employees, and providing them benefits such as loans, insurance

and medical services. We agree with Plaintiffs that providing

such benefits to public employees probably does promote the

public interest. However, these services cannot reasonably be

characterized as the exclusive province of the State, since

banks, credit unions, savings and loans associations, brokerage

firms, mutual funds, and insurance companies traditionally have

existed to promote savings, loans and health and other insurance.

As a result, we conclude that Defendants cannot be found to have

engaged in state action under the "traditional public function"

test.

3. Symbiotic Relationship
3. Symbiotic Relationship

State action can be found by way of a symbiotic

relationship. Under this test, a private party's acts "are

attributable to the state only if the government 'has so far

insinuated itself into a position of interdependence with [the

private entity] that it must be recognized as a joint participant

in the challenged activity . . . .'" Ponce, 760 F.2d at 381

(quoting Burton v. Wilmington Parking Auth., 365 U.S. 715, 725

(1961)). While "one of the key factors in determining whether a

symbiotic relationship exists is certainly whether the state

shared in any profits made," the lack of a financial partnership

is not necessarily dispositive. Rodr guez-Garc a, 904 F.2d at

98-99 (listing several factors relevant to finding "symbiotic

relationship").

In Burton, the Court found state action where the state

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leased public property to a private restaurant owner, who

maintained a racially discriminatory policy, acknowledged to be

indispensable to the success of the venture. Burton, 365 U.S. at

723-24. In contrast, there is no evidence that the government of

Puerto Rico somehow profited from the allegedly discriminatory

actions of Defendants. Even though the AEELA receives legally

mandated funds from public employees, no contention has been made

that this money becomes the property of the AEELA or the

government. In fact, Plaintiffs have not disputed that, upon

termination of employment, public employees receive back their

funds. While the Puerto Rico Secretary of the Treasury does

approve the investments made by the AEELA with these funds,

Plaintiffs have not contended that these funds are somehow used

to the benefit of the government of Puerto Rico, rather than

invested at a market rate of return. Also, Plaintiffs have not

even attempted to link the alleged election rigging to some

financial gain to the government of Puerto Rico, in the way that

the discrimination in Burton was linked to the state's returns

from the venture. Thus, whatever financial success the AEELA may

achieve is not shared with the government of Puerto Rico.

Similarly, while the lack of financial enrichment is

not dispositive, and "[t]he test is one of interdependence and

joint participation," we agree with the district court that

Plaintiffs have failed to contest the proposition that the AEELA

is essentially independent in the conduct of its daily affairs.

And no attempt has been made to link the government of Puerto

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Rico to the decisions of when to hold the Assembly and how to

conduct Board elections. As a result, we conclude that no

symbiotic relationship exists between the government of Puerto

Rico and the AEELA.

In passing, we observe that in the instant case,

Plaintiffs have not premised their claim on a private party's

specific act, directed by the government of Puerto Rico, which

somehow benefits the government via a symbiotic relationship with

the private actor. This point can be illustrated by comparison

with the symbiotic relationship that led to a finding of state

action in Schneider v. Colegio de Abogados de Puerto Rico, 565 F.

Supp. 963, 974, stay denied, 572 F. Supp. 957 (D.P.R. 1983),

vacated on other grounds Romany v. Colegio de Abogados de Puerto

Rico, 742 F.2d 32 (1st Cir. 1984) (holding that the district

court should have abstained from reaching the merits of the First

Amendment claims until the Puerto Rico Supreme Court decided a

pending controversy). In Schneider, the plaintiffs charged that

Puerto Rico laws forcing them to be members of Puerto Rico's

integrated bar association violated their rights to free speech

and free association, since those laws forced them to belong to,

and financially support, an organization (the Colegio) which

promoted ideological and political causes contrary to their

personal beliefs. Id. at 965-66. The court found state action,

noting not only that Puerto Rico law required attorneys to

maintain membership in the Colegio, but also emphasizing that

required membership aided the Colegio's public function of

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regulating lawyers, from which the government was found to

benefit. Id. at 973-74. Essentially, the government of Puerto

Rico was found to be advantaged by the specific act on which the

complaint was grounded, namely, forced membership in the Colegio.

By contrast, plaintiffs in the instant case do not

mount a facial challenge to the laws that create the AEELA or

require that it hold elections. Instead, they argue that the

AEELA's leadership committed discretionary acts of

discrimination, and did so while exercising authority granted by

the government of Puerto Rico. But plaintiffs fall short of

Schneider in at least two ways. First, the conduct they complain

of -- discrimination -- is not specifically mandated by Puerto

Rico law, as forced membership in the Colegio was for lawyers in

Schneider. Unlike the plaintiffs in Schneider, Plaintiffs do not

challenge conduct specifically directed by Puerto Rico law; for

example, their forced membership in the AEELA or the requirement

that the AEELA hold assemblies and elections. Instead,

Plaintiffs complain of the manner in which the assembly and the

elections were held -- this manner is not directed by statute.

Second, Plaintiffs have failed to link these specific acts of

discrimination in the holding of AEELA's assembly and elections

to any symbiotic relationship by which the government profits

from these specific discriminatory acts. No allegation has been

made that the government of Puerto Rico is somehow advantaged by

the alleged misconduct in AEELA's assembly or elections. By

contrast, in Schneider, bar membership required by Puerto Rico

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law constituted the conduct complained of, and also was alleged

to benefit the government of Puerto Rico, since compulsory

membership made possible the Colegio's regulatory functions. As

a result of these distinctions, we conclude that Schneider does

not avail Plaintiffs.

CONCLUSION
CONCLUSION

To maintain a Section 1983 action, state action must be

present. Because we conclude that, reading the pleadings in the

best light for Plaintiffs, they can prove no set of facts that

would implicate state action, the judgment of the district court

is

affirmed.
affirmed.

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