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USCA1 Opinion
August 19, 1992
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 92-1079
ROYAL CARIBBEAN CORP. AND CARIBBEAN CRUISE LINE, LTD.,
Plaintiffs, Appellants,
v.
PUERTO RICO PORTS AUTHORITY, ET AL.,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Carmen C. Cerezo, U.S. District Judge]
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Before
Breyer, Chief Judge,
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Lay,* Senior Circuit Judge,
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and O'Scannlain,** Circuit Judge.
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Francisco G. Bruno with whom Marisa Rivera Barrera and Sweeting
__________________ _____________________ ________
Gonzalez Cestero & Bruno were on brief for appellants.
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Jose Juan Torres-Escalera with whom Jiminez, Graffam & Lausell
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was on brief for appellees.
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* Of the Eighth Circuit, sitting by designation.
** Of the Ninth Circuit, sitting by designation.
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BREYER, Chief Judge. This appeal raises the
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question whether the Puerto Rico Ports Authority enjoys
Eleventh Amendment immunity from a tort action claiming that
it negligently maintained Pier No. 6 in San Juan Harbor. We
hold that the Authority, in operating and maintaining the
San Juan docks, is not an "arm" of the Commonwealth
government. Hence, it does not enjoy Eleventh Amendment
immunity. We reverse a district court judgment to the
contrary.
I
Background
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On November 15, 1988, the M/S Sovereign of the
Seas, a Norwegian passenger ship, was docking at Pier No. 6
in San Juan harbor. Suddenly, a steel post at the end of
the pier broke, setting loose three mooring lines, which
whipped across the ship, seriously injuring a crewman.
Then, another line, attached to another steel post on the
pier, snapped and struck a second crewman, seriously
injuring him. Caribbean Cruise Line, the ship's owner, and
Royal Caribbean Corporation, the ship's operator,
compensated the crewmen. The crewmen assigned their legal
rights and claims against the Puerto Rico Ports Authority to
Royal Caribbean Corporation and Caribbean Cruise Line, which
then brought this tort action against the Ports Authority.
The Ports Authority claimed Eleventh Amendment immunity.
The district court granted summary judgment in the
Authority's favor. Royal Caribbean and Caribbean Cruise
Line appeal.
II
The Standard
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The Eleventh Amendment bars a federal court suit
against a state without its consent. U.S. Const. amend. XI.
The question before us is whether the defendant in this case
is "'an arm [or alter ego] of the State partaking of the
State's Eleventh Amendment immunity, or is instead to be
treated as a municipal corporation or other political
subdivision to which the Eleventh Amendment does not
extend.'" Ainsworth Aristocrat International Pty., Ltd. v.
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Tourism Co. of Puerto Rico, 818 F.2d 1034, 1036 (1st Cir.
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1987) (quoting Mt. Healthy City School Dist. Bd. of Educ. v.
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Doyle, 429 U.S. 274, 280 (1977)) [hereinafter Ainsworth].
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We must answer this question in respect to the particular
"type of activity" by the Ports Authority that is the object
of the plaintiffs' claim, Puerto Rico Ports Authority v. M/V
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Manhattan Prince, 897 F.2d 1, 10 (1st Cir. 1990), in this
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case the operation and upkeep of the piers and various other
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facilities in San Juan harbor. In doing so, we consider
such matters as:
local law and decisions defining the
nature of the agency involved; whether
payment of any judgment will come out of
the state treasury; whether the agency
is performing a governmental or
proprietary function; the agency's
degree of autonomy; the power of the
agency to sue and be sued and enter into
contracts; whether the agency's property
is immune from state taxation and
whether the state has insulated itself
from responsibility for the agency's
operations.
M/V Manhattan Prince, 897 F.2d at 9 (1st Cir. 1990) (citing
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Ainsworth, 818 F.2d at 1037); see also Lake Country Estates,
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Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 400-02
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(1979); Durning v. Citibank, N.A., 950 F.2d 1419, 1423 (9th
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Cir. 1991); Figueroa-Rodriguez v. Aquino, 863 F.2d 1037,
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1044 (1st Cir. 1988). While not providing a mechanical
"test" for entitlement to Eleventh Amendment immunity, these
factors help us assess whether the Ports Authority has acted
more like a private company, or more like the Commonwealth's
government, in conducting the activities relevant to this
simple tort suit. See M/V Manhattan Prince, 897 F.2d at 10
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(immunity depends in part on "nature of [plaintiff's]
claim"); Jacintoport v. Greater Baton Rouge Port Commission,
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762 F.2d 435, 442 (5th Cir. 1985) (indicating reasons for
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immunity are stronger where claim implicates "public policy"
or "public affairs"), cert. denied, 474 U.S. 1057 (1986).
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III
The Standard Applied
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Several critical factors suggest that the Ports
Authority, in running and maintaining the docks, is not
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entitled to Eleventh Amendment immunity. First, Puerto Rico
law gives the Authority the specific tasks of "own[ing],
operat[ing], and manag[ing] . . . transportation
facilities," P.R. Laws Ann. tit. 23, 336, including the
"public property docks," id. 2202, where Royal Caribbean's
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ship docked and the crewmen were injured. It authorizes the
Authority to charge users of those docks fees "sufficient,
at least, to . . . cover the expenses incurred . . . for the
preservation, development, improvement, extension, repair,
conservation and operation" of those docks, to "pay
principal and interest on . . . the Authority's bonds," id.
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336(l)(1), and to "acquire, . . . produce, sell, . . . and
otherwise dispose of . . . services, goods, and . . .
property . . . in connection with its activities," id.
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336(i); see also id. 336(q),(s),(u), 2505. The Ports
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Authority does charge fees, which, its Executive Director
says, "cover" its operating expenses. (Indeed, its annual
financial statements show that its "net income" from fiscal
years 1987 through 1989 averaged more than $5 million.)
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Taken together, these factors suggest dock-operating
activities that are not "governmental" but "proprietary,"
rather like those of a private company that manages an
office building and charges tenants for its services. Cf.,
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e.g., Ainsworth, 818 F.2d at 1038 (Puerto Rico Tourism
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Company's "activities as a purchaser and supplier of slot
machines are not alien to a proprietary function"); Paul N.
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Howard Co. v. Puerto Rico Aqueduct Sewer Authority, 744 F.2d
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880, 886 (1st Cir. 1984) (government corporation
"established to provide drinking water and sewage facilities
. . . not normally immune"), cert. denied, 469 U.S. 1191
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(1985); City of Long Beach v. American President Lines,
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Ltd., 223 F.2d 853, 856 (9th Cir. 1955) (proprietary
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activity where government maintained harbor and charged fees
to users).
Second, the record indicates that the Ports
Authority, not the Commonwealth treasury, would likely pay
any eventual judgment in plaintiffs' favor (even if the
judgment is for the full $531,812, plus interest, costs,
fees and future payments to the injured crewmen, that
plaintiffs seek). The Ports Authority says that its fees
and other charges are "barely sufficient" to cover its
expenses. But, those "expenses," the Ports Authority's
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Executive Director says in his affidavit, "include payment
of judgments entered against it." And the Authority's
public financial statements tell the same story, showing
that the Authority deducted, from its annual revenues
(before "net income") $1.2 million for "litigation claims
and settlements" in 1988, and $76,000 in 1989.
Moreover, the Ports Authority does not depend on
Commonwealth financing for its income. Although the
Authority points to nearly $2,000,000 in construction grants
it received from the Commonwealth in the late 1960's, the
record and the public financial statements show that the
Authority, normally and in recent years, has not received
substantial Commonwealth financing. To the contrary, it
must pay the Commonwealth $400,000 per year in lieu of
taxes. P.R. Laws Ann. tit. 23, 354. The same statute
permits the Authority to reduce its annual payment of
$400,000 if its "net income is not sufficient" in any fiscal
year (a circumstance which, as far as the record and
statutes reveal, would include shortfalls due to payments of
court judgments). Id.; see also Canadian Transp. Co. v.
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Puerto Rico Ports Authority, 333 F. Supp. 1295, 1297-98
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(D.P.R. 1971).
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Further, the Ports Authority has insurance, which
would insulate the Commonwealth treasury from the effects of
an adverse judgment.
Finally, Puerto Rico statutes provide that the
Authority's debts are not "those of the Commonwealth." P.R.
Laws Ann. tit. 23, 333(b).
These facts weigh heavily against immunity.
Compare Feeney v. Port Authority Trans-Hudson Corp., 873
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F.2d 628, 631 (2d Cir. 1989), aff'd 495 U.S. 299 (1990)
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(where "liability will place the state treasury at risk,"
that is "the single most important factor" favoring
immunity); In re San Juan Dupont Plaza Hotel Fire
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Litigation, 888 F.2d 940, 943-44 (1st Cir. 1989) (Puerto
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Rico Tourism Company immune where Commonwealth supplied 70-
75% of Company's funds) [hereinafter San Juan Dupont];
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Culebras Enterprises Corp. v. Rivera Rios, 813 F.2d 506, 517
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(1st Cir. 1987) (similar); Morris v. Washington Metropolitan
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Area Transit Authority, 781 F.2d 218, 225 (D.C. Cir 1986)
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(immunity where "the practical result of a judgment . . .
would be payment from [state] treasuries"), with Paul N.
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Howard Co., 744 F.2d at 886 (that Sewer Authority did "not
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seriously dispute" plaintiff's claim that judgment could be
paid out of Authority's funds supports finding of no
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immunity); Jacintoport, 762 F.2d at 441 (similar, concerning
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government port authority); Fitchik v. New Jersey Transit
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Rail Operations, Inc., 873 F.2d 655, 660-61 (3d Cir.)
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(Transit Authority's dependence on state for only 30% of
funds, and authorization to "purchase liability insurance"
strongly supported no immunity), cert. denied, 493 U.S. 850
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(1989); see also Durning, 950 F.2d at 1424 n.2 ("legal
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liability" of state treasury, not agency's "practical
ability" to pay is "applicable standard"); but cf. San Juan
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Dupont, 888 F.2d at 943 (statutory provision that
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Commonwealth not liable for Tourism Company's debts
insufficient to outweigh other factors favoring immunity).
Third, the Ports Authority operates with a
considerable degree of autonomy. Its statute, which calls
it a "public corporation," gives it a "legal existence and
personality separate and apart form those of the
Government." P.R. Laws Ann. tit. 23, 333(b). It has
"complete control and supervision of any undertaking
constructed or acquired by it, including the power to
determine the character of and necessity for all its
expenditures." Id. 336(d). It can sue and be sued and
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makes its own contracts. Id. 336(e),(f). It may acquire,
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use and dispose of property as it deems "necessary" or
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"convenient" in carrying out its lawful activities. Id.
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336(i),(j). It may "borrow money" and "issue bonds" as its
activities require. Id. 336(n),(o). It has considerable
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discretion in setting fees. Id. 336(l)(1). Its funds are
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kept in accounts separate from the Commonwealth's treasury.
Id. 338. The Ports Authority, not the Commonwealth, is
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liable for payment of principal and interest on its bonds.
Id. 336(u). And, as we have said, its "debts" and
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"obligations . . . shall be deemed to be those of" the Ports
Authority, and not to be those of the Commonwealth. Id.
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333(b).
We recognize that other factors argue in favor of
Eleventh Amendment immunity. The Authority's operating
autonomy is tempered by the fact that several government
officials and one citizen appointed by the Governor comprise
its board of directors, that this board selects an Executive
Director, id. 334, who communicates regularly with the
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executive branch, and that this arrangement (according to
the Executive Director's affidavit) permits the Governor's
office to "exercise significant control over the planning
and administration of its policies" (but not to "exercise
control over the day-to-day internal operations" of the
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Authority). See also Port Authority Police Benevolent Ass'n
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v. Port Authority of New York and New Jersey, 819 F.2d 413,
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417 (3d Cir.) (Governors' roles in appointment of
commissioners and veto over their actions indicates
Authoritynot "independent"),cert. denied,484 U.S.953 (1987).
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In addition, the Authority must submit various
reports to the Governor and the Legislature; it must follow
other Treasury-prescribed accounting rules; it must keep its
funds in Commonwealth-approved depositories. P.R. Laws Ann.
tit. 23, 345, 338. Further, the Authority can (like a
sovereign) exercise the power of eminent domain. Id.
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336(h); see also id. 339, 339a. And, it is immune from
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Commonwealth taxes (although it must, as we have noted, pay
an annual $400,000 fee in lieu of taxes). Id. 348, 354.
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Finally, as the district court found, relevant
statutes and their legislative histories stress the "public"
objectives of the Authority, including its mandates to
promote "the general welfare," to "increase . . . commerce
and prosperity," id. 348(a), and "to facilitat[e] and
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motivat[e] the development of the economic sectors that
drive the present Puerto Rican economy," Legislature of
Puerto Rico, 1989 Act No. 65, at 300 (Aug. 17, 1989)
(Statement of Motives for S. Bill 269, H. Bill 446). These
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express statutory and legislative purposes make the
Authority's activities seem more "governmental" and less
"proprietary." Nonetheless, these provisions are consistent
with "proprietary" activities and findings of no immunity.
See Durning, 950 F.2d at 1421 (Development Authority is not
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immune despite a statutory purpose to redress "critical
shortage of adequate housing" and "to promote economic
welfare"); Ainsworth, 818 F.2d at 1038 (Puerto Rico Tourism
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Company not necessarily immune despite a statute declaring
it an "instrumentality of the Government" with the purpose
of "promot[ing] tourism and overs[eeing] gambling");
Riefkohl v. Alvarado, 749 F. Supp. 374, 375 (D.P.R. 1990)
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(Puerto Rico Electric Power Authority not immune, despite
statute declaring it a "governmental instrumentality" with
the purpose of "promot[ing] the general welfare and
increas[ing] commerce and prosperity"). After all, a
private entity might operate a hotel or restaurant, in part
with the object of helping to promote economic prosperity
and development.
Overall, the factors militating against immunity
predominate. They indicate that the Ports Authority is an
entity that enjoys a considerable degree of autonomy, that
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provides a service (maintaining and operating docking
facilities) that it, in effect, "sells" to users, and that
it here faces a lawsuit in which the plaintiffs seek a
judgment likely to be paid from the Authority's funds, not
from the Commonwealth's Treasury. Numerous cases find no
immunity on facts very similar to those present here. See,
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e.g., Feeney, 873 F.2d 628; Jacintoport, 762 F.2d 435; City
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of Long Beach, 223 F.2d 853; see also Paul N. Howard Co.,
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744 F.2d 880; Durning, 950 F.2d 1419.
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We recognize that, in M/V Manhattan Prince, we
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found that this same Ports Authority enjoyed immunity from a
tort suit claiming negligence by a Ports Authority-licensed
harbor pilot. In that case, however, the Ports Authority's
relevant "type of activity," 897 F.2d at 10, was
fundamentally different. The Authority did not "sell" pilot
services. It did not "train pilots" or "derive[] . . .
revenue from the . . . pilot system." Id. at 12. Rather,
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the shipowners, required to use the pilot service, paid "a
fee directly to the pilot and also into a trust fund,
created by [the Ports Authority], for the pilots' pension."
Id. at 10 (quoting district court opinion, 669 F. Supp. 34,
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37 (D.P.R. 1987)). The Authority lacked the "power to
control the actions of the pilot while he" performed his
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duties. Id. The Authority's role was not that of selling
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pilot services, but, rather, was that of regulating the
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licensing of pilots (and regulating pilot fees and
retirement benefits). Such regulation is traditionally a
governmental, not a proprietary, function. Id. at 10-11.
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The difference between the primarily "governmental function"
at issue in M/V Manhattan Prince, and the basically
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"proprietary function" here at issue explains the difference
in result.
For these reasons, the summary judgment in the
Port Authority's favor is
Reversed.
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Document Info
Docket Number： 92-1079
Filed Date： 8/19/1992
Precedential Status： Precedential
Modified Date： 9/21/2015