Gershwain Sprauve v. West Indian Company Limited ( 2015 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 13-4371
_____________
GERSHWAIN SPRAUVE,
Appellant
v.
THE WEST INDIAN COMPANY LIMITED;
JOSEPH BOSCHULTE;
BOARD OF DIRECTORS OF THE WEST INDIAN
COMPANY LIMITED
_____________
No. 14-1151
_____________
ANDREA V. SMITH,
Appellant
v.
THE WEST INDIAN COMPANY LIMITED;
JOSEPH BOSCHULTE, in his personal capacity;
THE BOARD OF DIRECTORS OF THE WEST INDIAN
COMPANY LIMITED;
JOSEPH BOSCHULTE, as President and Chief Executive
Officer of the West Indian Company Limited
_____________
On Appeal from the District Court
of the Virgin Islands
(Civil Action Nos. 3:13-cv-00008 and 3:13-cv-00030)
District Judge: Hon. Susan D. Wigenton
_________________
Argued: December 8, 2014
Before: CHAGARES, JORDAN and SHWARTZ,
Circuit Judges
(Opinion Filed: August 25, 2015)
Karin A. Bentz, Esq. (Argued)
Julita K. De León, Esq.
The Law Offices of Karin A. Bentz, P.C.
5332 Raadets Gade, Suite 3
St. Thomas, VI 00802
Attorneys for Appellants Gershwain Sprauve and
Andrea Smith
Micol L. Morgan, Esq. (Argued)
Bailey A. Calhoun, Esq.
Ogletree, Deakins, Nash, Smoak & Stewart, LLC
The Tunick Bldg., Suite 201
1336 Beltjen Rd.
St. Thomas, VI 00802
Attorneys for Appellee Joseph Boschulte in his
individual capacity
Mark D. Hodge, Esq. (Argued)
Hodge & Hodge
1340 Taarneberg
St. Thomas, VI 00802
Adriane J. Dudley, Esq.
Dudley Rich Davis LLP
5194 Dronningens Gade, Suite 3
Hibiscus Alley
St. Thomas, VI 00802
Attorney for Appellees The West Indian Company
Limited; Board of Directors of the West Indian
Company Limited; and Joseph Boschulte, as President
and Chief Executive Officer of the West Indian
Company
2
__________________
OPINION
__________________
CHAGARES, Circuit Judge
Gershwain Sprauve and Andrea Smith appeal the
District Court’s dismissal of their cases for the failure to state
a claim. The District Court found that Sprauve’s and Smith’s
claims under the First and Fourteenth Amendments and 42
U.S.C. § 1983 failed because defendant West Indian
Company, Limited (“WICO”), their former employer, is not a
government entity. Applying the United States Supreme
Court’s decision in Lebron v. National Railroad Passenger
Corporation, 513 U.S. 374 (1995), we hold that WICO must
be considered a government entity for the purposes of
Sprauve’s and Smith’s constitutional claims. For the reasons
that follow, we will affirm in part, reverse in part, vacate in
part, and remand for further consideration of Sprauve’s and
Smith’s claims.
I.
We take most of the following facts from the
plaintiffs’ complaints, which we assume to be true for the
purposes of a motion to dismiss. Phillips v. Cnty. of
Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). WICO was
founded in 1912, prior to the United States’ acquisition of the
Virgin Islands from Denmark in 1917. WICO began as a coal
bunkering business and later grew to serve as the “Port
Agent” for the cruise lines that visit the port of Charlotte
Amalie in St. Thomas. Joint Appendix (“J.A.”) 3, 33. WICO
also manages the Havensight Mall at that port. Id. In 1986,
WICO began dredging activities in the St. Thomas harbor.
Sprauve & Smith Br. 4. This led to public opposition and
litigation regarding the scope of these activities. Id.
In 1993, the Government of the Virgin Islands
purchased 100% of the shares of WICO through a Stock
Purchase Agreement. The purchase was approved by the
Legislature of the Virgin Islands in a special session in Act
No. 5826 (the “Act”). J.A. 421. The Act explains that “the
Government of the Virgin Islands . . . has been engaged for a
3
number of years in proceedings, including litigation,
regarding those certain rights of [WICO]” and that
“acquisition of ownership of the Company by the
Government would permit the final conclusion of all such
proceedings and related disputes, and ensure that the
development rights of the Company conferred by . . .
agreements and treaties would be subject in all respects to the
control of the Government.” Id. The Act further explains
that acquisition of WICO would “transfer to public ownership
and control substantial real estate, including certain areas that
may be suitable for development for public use.” Id. Section
8(b) of the Act provides:
Upon acquisition of the Facilities and all of the
issued and outstanding shares of common stock
of the Company by the Government, the
Company is hereby granted the status and
authority of a public corporation and
governmental instrumentality of the
Government of the Virgin Islands of the United
States and shall be deemed to be a public entity
operating on behalf of the Government, rather
than a private corporation . . . .
J.A. 424.
Following this acquisition, it is undisputed that 100%
of WICO shares were transferred to the Virgin Islands Public
Finance Authority (“PFA”), a public corporation and
governmental instrumentality created by the Government of
the Virgin Islands. J.A. 229–30. The PFA is run by a board
of directors appointed by the Governor of the Virgin Islands,
with the advice and consent of the Virgin Islands Legislature.
J.A. 33. WICO is run by its own board of directors,
appointed by the PFA. Id.
Plaintiff Gershwain Sprauve began working at WICO
in 1997 as the Manager of Mall Operations. In 2009, WICO
President and Chief Executive Officer (“CEO”) Edward
Thomas indicated to the WICO Board of Directors (the
“Board”) that he planned to retire. Sprauve submitted his
application for the position and Thomas verbally
recommended Sprauve for the job to the Board. In March
4
2010, the Board offered the CEO position to Sprauve, but it
later reneged on this offer. In December 2010, the Board
extended Thomas’s contract. In 2011, Thomas again
recommended Sprauve to the Board as his replacement. The
Board instead convened a search committee and eventually
hired defendant Joseph Boschulte as the new CEO and
President of WICO. Boschulte began his tenure in that
position on May 1, 2012.
Sprauve alleges that Boschulte was hostile toward him
and falsely accused him of making various mistakes in the
workplace. Sprauve eventually wrote a letter to the Board
complaining about Boschulte’s behavior. The Board
launched an investigation. Shortly after this investigation,
Boschulte terminated Sprauve, alleging he failed to attend a
hearing before the Legislature’s Finance Committee to
discuss WICO’s budget. Sprauve asserts that this allegation
was pretext.
Plaintiff Andrea Smith began working at WICO in
1981, before the company was purchased by the Virgin
Islands. In 2012, she was promoted to Chief Financial
Officer. When Edward Thomas retired, she served as the
Interim President and CEO of WICO until Boschulte was
hired. Smith alleges that Boschulte knew that she had been
interviewed by the Board as part of its investigation into
Sprauve’s claim and that Boschulte became angry with her.
She alleges that he then took various retaliatory actions
against her. On January 11, 2013, Boschulte terminated
Smith for what he called “failure to execute.” J.A. 38.
On January 28, 2013, Sprauve filed a complaint
against WICO and Boschulte in the District Court of the
Virgin Islands. He alleged violations of his First and
Fourteenth Amendment rights under the United States
Constitution, a claim under 42 U.S.C. § 1983 against
Boschulte, and a number of claims under Virgin Islands law.
WICO and Boschulte moved to dismiss Sprauve’s complaint
under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
The Court granted the motion. J.A. 398.
Smith filed her own complaint against WICO and
Boschulte alleging violations of the First and Fourteenth
5
Amendments, a claim under 42 U.S.C. § 1983 against
Boschulte, and a number of claims under Virgin Islands law.
WICO and Boschulte filed a motion to dismiss under Rules
12(b)(1) and 12(b)(6) and Boschulte filed a motion to dismiss
under Rule 12(b)(6). The District Court granted the motions.
J.A. 393; Supplemental Appendix (“S.A.”) 2.
The District Court conducted the same analysis in
granting both WICO’s and Boschulte’s motions to dismiss. It
explained that “[t]he first and central issue raised . . . is
whether WICO is a public corporation with public employees
versus a private entity with private employees.” J.A. 405;
S.A. 9. To make this determination, the District Court first
looked to decisions of the Virgin Islands Public Employees
Relations Board (“PERB”), which found that WICO
employees are not public employees. J.A. 405–07; S.A. 9–
10. Next, the District Court examined the language of the
Act. J.A. 407; S.A. 10–11. The District Court ultimately
concluded that “WICO cannot be considered a purely public
entity,” that its employees are not public employees, and that
it is not a public corporation. J.A. 407–08; S.A. 11–12. The
District Court then found that because WICO is not a public
entity, its alleged conduct could not be considered to have
been “under color of state law” for purposes of liability under
section 1983, J.A. 409; S.A. 13, and that Smith and Sprauve’s
direct constitutional claims fail because WICO and Boschulte
are private actors. J.A. 411; S.A. 14–17. Finally, the District
Court declined to exercise supplemental jurisdiction over the
remaining claims under Virgin Islands law. J.A. 412; S.A.
18.
Both Sprauve and Smith timely appealed.1
1
In both Sprauve’s and Smith’s cases the defendants also
moved to quash service of process to the WICO Board and to
dismiss all claims against the Board. The District Court
granted these motions and the plaintiffs have not appealed
these portions of the District Court opinions. In addition,
plainti ff Smith conceded that her claims for negligent
misrepresentation and fraud (Count XIII) and false light
(Count XIV) should be dismissed. App. 370. The District
Court also dismissed Smith’s free association claim (Count
XVIII) on the merits, and Smith has not appealed that ruling.
6
II.
The District Court had jurisdiction under 28 U.S.C. §
1331, 42 U.S.C. § 1983, and 28 U.S.C. § 1343(a)(3). We
have appellate jurisdiction pursuant to 28 U.S.C. § 1291. Our
standard of review for a dismissal under Federal Rule of Civil
Procedure 12(b)(6) is de novo. Phillips, 515 F.3d at 230.2
III.
Sprauve and Smith bring claims under the First and
Fourteenth Amendments and under 42 U.S.C. § 1983. To
state a section 1983 claim, Sprauve and Smith must allege
facts demonstrating, inter alia, that the misconduct they
complain of was “under color of state law.” Groman v. Twp.
of Manalapan, 47 F.3d 628, 638 (3d Cir. 1995). To state a
constitutional claim, they must allege facts showing, inter
alia, that the misconduct involved “state action.” Lugar v.
Edmondson Oil Co., Inc., 457 U.S. 922, 937 (1982). The
“under color of state law” analysis is equivalent to the “state
action” analysis. Leshko v. Servis, 423 F.3d 337, 339 (3d
Cir. 2005).
The Supreme Court has acknowledged that “[i]t is fair
to say that ‘our cases deciding when private action might be
deemed that of the state have not been a model of
consistency.’” Lebron, 513 U.S. at 378 (quoting Edmonson
v. Leesville Concrete Co., 500 U.S. 614, 632 (1991)
(O’Connor, J., dissenting)). Armed with that body of law, we
have endeavored to determine whether state action exists in
circumstances including where an activity is significantly
encouraged by the state, where the state acts as a joint
participant, and where an actor “performs a function
2
The defendants filed motions to dismiss under both Rules
12(b)(1) and 12(b)(6). The District Court purported to grant
defendants’ motions under 12(b)(1), but did so using a Rule
12(b)(6) analysis. Thus, we will treat the order as having
been issued under Rule 12(b)(6). See, e.g., Kehr Packages,
Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408–09 (3d Cir. 1991).
7
designated by the state, or is entwined with government
policies or management.” Leshko, 423 F.3d at 340. We have
described this process as “labyrinthine,” id. at 338, “murky,”
Fitzgerald v. Mountain Laurel Racing, Inc., 607 F.2d 589,
591 (3d Cir. 1979), and a “protean concept,” Magill v.
Avonworth Baseball Conference, 516 F.2d 1328, 1331 (3d
Cir. 1975) (quotation marks omitted).
However, we may avoid this determination of whether
private party conduct constitutes state action when the actor is
the government. See Lebron, 513 U.S. at 378 (noting that
“[i]t may be unnecessary to traverse [the] difficult terrain [of
private party state action analysis] in the present case, since
Lebron’s first argument is that Amtrak is not a private entity
but Government itself”). 3 The Supreme Court’s decision in
Lebron sets forth guideposts for resolving whether a
corporate entity may be considered the government for
purposes of constitutional claims. The plaintiffs argue that
WICO is a governmental entity and is therefore subject to
claims under the United States Constitution and under section
1983. Applying Lebron, we agree.
A.
In Lebron, the petitioner filed a lawsuit against the
National Railroad Passenger Corporation (also known as
Amtrak) claiming that it had violated his First and Fifth
Amendment rights. Id. at 377. Amtrak was established in
1970 by Congress, inter alia, “in order to avert the threatened
extinction of passenger trains in the United States,” id. at 383,
and was to operate, to the extent consistent with federal law,
subject to the District of Columbia Business Corporation Act,
see 45 U.S.C. § 541 (1970). Amtrak later incorporated under
that statute. See Lebron, 513 U.S. at 385. See also 45 U.S.C.
§ 541 (1970) (authorizing incorporation of Amtrak). A
majority of Amtrak’s governing board is appointed by the
Government and Amtrak is required to submit three separate
3
To repeat, we are only examining whether WICO is a
government entity for the purpose of determining whether
constitutional claims can be lodged directly against it. This
Opinion does not address, for example, whether WICO is
entitled to governmental immunities. We leave that issue for
another day.
8
annual reports to the Government. Lebron, 513 U.S. at 385.
Nonetheless, Congress provided that Amtrak “shall not be an
agency, instrumentality, authority, or entity, or establishment
of the United States Government.” 45 U.S.C. § 541 (1970).
To give some context to its analysis, the Lebron Court
first engaged in a detailed recitation of “the long history of
corporations created and participated in by the United States”
with a particular focus on level of control by the Government.
Lebron, 513 U.S. at 386. The first such corporation was the
Bank of the United States, created in 1791, but the
Government’s participation in that corporation was limited to
holding twenty percent of the Bank’s stock. Id. at 386–87.
The Government first participated in a corporation in which it
appointed a majority of the corporation’s directors – thus
controlling the corporation – in 1902. Id. at 387. Congress
that year authorized the President to acquire the assets of the
New Panama Canal Company of France, including its
holdings in the Panama Railroad Company – much like Act
No. 5826 authorized the Government of the Virgin Islands to
acquire WICO. See id. The purpose of the purchase was “to
facilitate construction of the Panama Canal.” Id. The
Government “became the sole shareholder of the Panama
Railroad, and continued to operate it under its original
charter, with the Secretary of War, as the holder of the stock,
electing the Railroad’s 13 directors.” Id. By the end of
World War II, the number of Government corporations had
grown to fifty-eight, and immediately after that war, many of
those corporations were dissolved because of Congress’s
perception that “Government-created and -controlled
corporations had gotten out of hand in both their number and
their lack of accountability.” Id. at 389. A new wave of
Government corporations began again in the 1960s and,
starting in 1962, these corporations were largely designated
not to be Government agencies. Id. at 390. Congress
intended that these new Government corporations (such as the
Communications Satellite Corporation (Comsat)) would
compete in the private sector, “unhindered by the restraints of
bureaucracy and politics.” Id. at 391. Despite being labeled
as not Government entities, governance structures varied in
these new Government corporations. While Comsat’s board
was controlled by twelve privately-appointed directors (and
three appointed by the President), other Government
9
corporations such as the Corporation for Public Broadcasting,
the Legal Services Corporation, and Amtrak, gave voting
control to Government appointees. Id.
Amtrak’s first argument to the Court in Lebron was
that Congress’s disclaimer of Amtrak’s Government agency
status was dispositive of Lebron’s constitutional claims. The
Court acknowledged that this disclaimer of status was
controlling for matters within Congress’s control. Id. at 392.
The Court noted that such matters include waivers of
sovereign immunity and whether statutes such as the
Administrative Procedure Act and laws regarding
Government procurement apply to the entity. However, the
Court held that Congress could not determine whether
Amtrak was a Government entity for purposes of
constitutional claims. Id. The Court reasoned that “[i]f
Amtrak is, by its very nature, what the Constitution regards as
the Government, congressional pronouncement that it is not
such can no more relieve it of its First Amendment
restrictions than a similar pronouncement could exempt the
Federal Bureau of Investigation from the Fourth
Amendment.” Id. As a result, the Court rejected Amtrak’s
first argument.4
The Lebron Court acknowledged that the question of
whether Amtrak could be considered a Government agency or
instrumentality for the purpose of constitutional claims
against it was not answered by a statute or by prior caselaw.
Id. at 394. So, the Court analyzed two factors to answer this
question. First, the Court noted that Amtrak was established
by a special statute for the purpose of furthering
governmental goals. Id. at 397. Second, consistent with
other parts of the opinion, the Court focused heavily on
4
Our Court has similarly observed that labels alone are not
dispositive of the state actor issue and emphasized that we
look to the “reality over the form” of the nature of the state
actor’s relationship with the state. Leshko, 423 F.3d at 342
(concluding foster parents are not state actors despite a
Pennsylvania law that designates them public employees).
Thus, we consider facts, rather than labels to determine
whether an entity or person is a state actor for section 1983
purposes.
10
control of the corporation. Id. at 397–98. An important
measure of control to the Court was whether a majority of the
governing body of the corporation was appointed by the
federal or state government. Id. For instance, the Court
noted that in Pennsylvania v. Board of Directors of City
Trusts of Philadelphia, 353 U.S. 230 (1957) (per curiam):
we held that Girard College, which has been
built and maintained pursuant to a privately
erected trust, was nevertheless a governmental
actor for constitutional purposes because it was
operated and controlled by a board of state
appointees, which was itself a state agency.
Amtrak seems to us an a fortiori case.
Lebron, 513 U.S. at 397 (citation omitted). Another measure
of control was its duration. The Court recognized that six of
Amtrak’s eight externally-named directors were appointed by
the Government and that this control was not merely
temporary. Id. at 397–98. As a result, the Court held “that
where, as here, 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 400.
B.
1.
Applying the Lebron decision to the facts of this case,
we note first that WICO was established as “a public
corporation and governmental instrumentality of the
Government of the Virgin Islands of the United States,”5 J.A.
5
It is immaterial to our analysis that WICO existed as a
private corporation before it became a public corporation of
the Virgin Islands. See Hall v. Am. Nat’l Red Cross, 86 F.3d
919, 921 (9th Cir. 1996) (holding that “[t]he first part of the
Lebron test is satisfied” where “[t]he Red Cross originated as
a private corporation, organized under the laws of the District
of Columbia in 1881 [and] Congress reincorporated the Red
Cross in 1905 . . . .”); Becker v. Gallaudet Univ., 66 F. Supp.
11
61, in a special session of the Twentieth Legislature of the
Virgin Islands in 1993. J.A. 58–63 (Act No. 5826).6 The
government of the Virgin Islands took this action to further
several government objectives. See Horvath v. Westport
Library Ass’n, 362 F.3d 147, 153 (2d Cir. 2004) (determining
that “the Library was created by a special act of the
Connecticut State legislature and there is no doubt that the
provision of library services is a legitimate statutory
objective” and holding that “the Lebron standard has been
satisfied.”); Hack v. President & Fellows of Yale Coll., 237
F.3d 81, 84 (2d Cir. 2000) (holding that the first part of
Lebron was “easily satisfied [because] the State of
Connecticut created the corporate entity by special law, and
higher education is a governmental objective (although not
the exclusive province of government)”), abrogated on other
grounds, Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002).
See generally Clark v. Cnty. of Placer, 923 F. Supp. 1278,
1284 (E.D. Cal. 1996) (“[A]ll that is required for the purpose
of § 1983 liability under Lebron is that the corporation have a
‘public statutory mission.’”) (citation omitted).7
2d 16, 18, 20 (D.D.C. 1999) (determining that the first Lebron
factor was satisfied although the institution was founded
privately in 1856 and incorporated by Congress in 1857);
Clark v. Cnty. of Placer, 923 F. Supp. 1278, 1283 n.8 (E.D.
Cal. 1996) (“The court does not regard the fact that at one
time the PCFA operated free of the county as a significant
distinction between the matter at bar and Lebron.”) (citation
omitted). See also Lebron, 513 U.S. at 397 (noting a prior
case where Girard College, which was founded and
maintained through a privately erected trust, was held to be a
governmental actor (citing Bd. of Dirs. of City Trusts of
Phila., 353 U.S. at 231)).
6
We have recognized “that in deciding a motion to dismiss,
courts generally may consider only the allegations contained
in the complaint, exhibits attached thereto, and matters of
public record.” Beverly Enters., Inc. v. Trump, 182 F.3d 183,
190 n.3 (3d Cir. 1999). The materials cited herein fit within
those parameters.
7
By way of background, Denmark granted WICO land
“located in the Long Bay area of the St. Thomas Harbor and
12
One government objective of Act No. 5826 was to
resolve all disputes – including litigation – between the
Virgin Islands and WICO. J.A. 58. Another government
objective of the Act was to ensure WICO’s development
rights were “subject in all respects to the control of the
Government.” Id. Still another government objective was to
“transfer to public ownership and control substantial real
estate, including certain areas that may be suitable for
development for public use, as well as areas that may produce
income . . .” Id. See J.A. 61 (“It is hereby resolved and
declared that the purchase of the Facilities pursuant to this
Act, and the operation and maintenance of the Facilities, and
the collection of the revenues derived from the operation of
the Facilities . . . constitute public purposes.”).
Second, the Virgin Islands government clearly has
permanent8 and complete control over WICO as a result of
other areas in Charlotte Amalie in the United States Virgin
Islands,” J.A. 64, along with buildings and improvements on
the land, as well as “rights to reclaim and develop certain
submerged lands in the St. Thomas Harbor,” id., and that
grant was preserved when Denmark ceded the Virgin Islands
to the United States in 1917. West Indian Co, Ltd. v. Gov’t
of V.I., 643 F. Supp. 869, 870 (D.V.I. 1986). See J.A. 68
(noting WICO’s rights over “wharves, docks, piers, slips,
[and] retaining walls.”). WICO and the Virgin Islands had
many disputes between them over the course of time. See
Alexander A. Farrelly, Governor of the United States Virgin
Islands, State of the Territory Address at the Senate
Chambers, 12 (Jan. 14, 1993) (noting WICO’s “controlling
rights of Charlotte Amalie’s harbor . . . has been a source of
great concern to all of us. Repeatedly, various attempts by
this government to exercise some degree of regulation and
regain control over this strategic port of entry have been
thwarted by the treaty stipulations and the courts.”). For
instance, as discussed earlier, WICO’s dredging operations
were hotly contested between the parties. See West Indian
Co., 643 F. Supp. at 870–84.
8
The Lebron Court noted that temporary Government control
would not satisfy the second, or control, factor. See 513 U.S.
at 395. Accordingly, the requisite control of a corporation
13
the Act. Specifically, the Board is composed of nine
directors. West Indian Co. Ltd. Fiscal Year 2015 Budget
Hearings Post Audit Div., Comm. on Fin., 30th Legis. 2
(2014) (Report of Jose L. George, Post Auditor). The parties
do not dispute that all of these directors are appointed by the
PFA. See id. (noting that the Act directed the Governor of
the Virgin Islands to transfer all of the WICO’s stock to the
PFA); J.A. 60 (same). See generally Hack, 237 F.3d at 84
(holding that the Lebron control factor was not met and
noting “[t]wo of nineteen board members is . . . a long way
from control”); Hall v. Am. Nat’l Red Cross, 86 F.3d 919,
921–22 (9th Cir. 1996) (applying Lebron and holding that the
Government did not control the Red Cross because the
Government appoints only eight of fifty-three on the
governing board); Barrios-Velazquez v. Asociacion de
Empleados del Estado Libre Asociado de P.R., 84 F.3d 487,
492 (1st Cir. 1996) (determining that Lebron control factor
not met because “the government of Puerto Rico does not
retain the power to appoint any of [the corporation’s]
directors”); Am. Bankers Mortg. Corp. v. Fed. Home Loan
Mortg. Corp., 75 F.3d 1401, 1407 (9th Cir. 1996) (applying
Lebron and holding that the Government’s control over
Freddie Mac was missing because the “government is entitled
to appoint fewer than one-third of Freddie Mac’s directors”);
Wilkinson v. Legal Servs. Corp., 27 F. Supp. 2d 32, 45
(D.D.C. 1998) (holding that Lebron control factor was met
does not exist where “the Government exerts its control [] as
a creditor,” id., where “a provision exists that will
automatically terminate control upon termination of a
temporary financial interest,” id., or where the Government is
acting as a conservator, Garcia v. Fed. Nat’l Mortg. Corp.,
782 F.3d 736, 744 (6th Cir. 2015) (Donald, J., concurring)
(noting holdings in Lebron and Mik v. Fed. Home Loan
Mortg. Corp., 743 F.3d 149 (6th Cir. 2014) that “a necessary
condition precedent to consider a once-private entity a state
actor is that the government has ‘permanent’ control over the
entity,” and concluding that “FHFA’s conservatorship of
Freddie Mac . . . is, by definition, temporary”). It is
undisputed that the Virgin Islands’ control of WICO is
permanent.
14
because “LSC’s Board is composed entirely of political
appointees”).9
Accordingly, the factors set forth in Lebron are met
and, therefore, WICO is an agency or instrumentality of the
Virgin Islands and subject to the constraints of the
Constitution.
2.
The defendants argue that WICO should not be
considered a government entity because WICO employees,
unlike other government employees, “are not beneficiaries of
the Government Employees’ Retirement System, are not
covered by the Personnel Merit System, are not subject to the
jurisdiction of the Public Employees Relations Board, and are
not hired through the Division of Personnel.” WICO Br. 17.
We are not persuaded by this argument. The Lebron decision
counsels that while statutes may be dispositive of matters
within government control, “such as the Administrative
Procedure Act . . . and the laws governing Government
procurement,” 513 U.S. at 392, reliance on such statutes to
determine the constitutional rights of citizens is “misplaced.”
Id.10 Indeed, a comparison of the facts of Lebron with the
9
We note that several courts have held the Lebron factor of
control was met in the absence of the government having the
right to appoint a majority of a corporate entity’s governing
board where there exist other indicia of government control.
See, e.g., Horvath, 362 F.3d at 153 (holding that although “it
is correct that only one-half, and not a majority, of the
Library’s trustees are appointed by the Town . . . [t]he
additional fact that [almost nine tenths] of the Library’s
funding comes from . . . the Town convinces us that the Town
maintains sufficient control over the Library”); Becker, 66 F.
Supp. 2d at 21 n.6 (holding that the composition of the
governing board was not the “sole factor” determining
government control).
10
The appellees’ statement that WICO employees “are not
subject to the jurisdiction of the Public Employees Relations
Board [‘PERB’],” WICO Br. 17, refers to two decisions by
the PERB regarding its limited jurisdiction. Insofar as neither
PERB decision considered claims under the Constitution, we
15
present case shows why the appellees’ argument must be
rejected. While the appellees here ask us to assume the
Virgin Islands intended that WICO be considered a private
entity because WICO employees are treated differently than
other government employees in several respects and ask us
essentially to ignore the clear language of the Act providing
that WICO is “a public corporation and governmental
instrumentality of the Government of the Virgin Islands of the
United States,” Congress explicitly provided that Amtrak was
not a government entity. Despite Congress’s clear direction,
the Court in Lebron held that Amtrak was to be considered a
Government entity for purposes of claims under the
Constitution. Id. at 400. See Wilkinson, 27 F. Supp. 2d at
44, 45 (holding that where Congress provided that the Legal
Services Corporation in all but several respects “should be
treated as a private, non-profit corporation,” it is outside
Congress’s authority “to make the final determination of
LSC’s status as a government entity for purposes of
determining the constitutional rights of citizens affected by its
actions.”) (citing Lebron, 513 U.S. at 392). WICO is
similarly a government entity for purposes of plaintiffs’
constitutional claims.
The defendants also seize upon language in the Act
providing that WICO is empowered to take action “under the
general business corporation laws of the Virgin Islands,” J.A.
60, unless such laws are inconsistent with the Act. J.A. 61.
This, they contend, means that WICO operates as a private
company and should be treated as such. WICO Br. 23. This
argument is also foreclosed by the Supreme Court’s decision
in Lebron. In Lebron, the Court explained that Amtrak “is
subject to the provisions of [the District of Columbia
Business Corporation] Act only insofar as the [Act creating
need not consider them. See Richards v. City of Lowell, 472
F. Supp. 2d 51, 71 n.9 (D. Mass. 2007) (conducting an
analysis under Lebron and noting “[t]he City has cited a
number of cases to support its argument that the GLWIB was
not a municipal agency and [the plaintiff] was not a City
employee. None of these cases addresses the question of
whether, for constitutional purposes, actions taken by
employees of a workforce investment board may be fairly
attributable to the City.”) (citation omitted).
16
Amtrak] does not provide to the contrary.” 513 U.S. at 385.
The Court in Lebron was not persuaded by this feature of
Amtrak’s corporate structure and, indeed, the Court
admonished that “[i]t surely 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.” Id. at 397. We therefore reject the
defendants’ argument.
* * * * *
Because WICO was established as a government
corporation pursuant to a special Act of the Virgin Islands
Legislature to further government objectives, and WICO is
permanently and completely controlled by government
appointees, it is part of the government for purposes of the
constitutional claims and section 1983 claims brought by
Sprauve and Smith.11
11
Because our decision reverses the basis on which the
District Court declined to exercise supplemental jurisdiction
over Sprauve’s and Smith’s state law claims, we will also
vacate that portion of the order and remand to the District
Court to give it an opportunity to consider exercising its
jurisdiction over those claims. See Trinity Indus. v. Chicago
Bridge Co., 735 F.3d 131, 141 (3d Cir. 2013).
We express no opinion as to the merits of the
remaining claims in this case, except as to the appellants’
direct constitutional claims against Boschulte in his personal
capacity. These claims are duplicative of their section 1983
claims against him. They arise from the same basic events—
Sprauve’s and Smith’s respective terminations—and raise
substantially the same allegations. See, e.g., J.A. 40, 45
(Smith alleging in Count VII, under section 1983, that her due
process rights were violated when her employment was
terminated by Boschulte “without affording [her] notice or
opportunity to be heard” and Count II, alleging that under the
Fourteenth Amendment that WICO, the Board, and
Boschulte, in both his personal and professional capacities
“engaged in a continuing course of conduct” that deprived her
of her due process rights “by not affording [her] [notice] and
opportunity to be heard before terminating her employment.”)
17
IV.
For the foregoing reasons, we will affirm the District
Court’s orders in part, reverse in part, vacate in part, and
remand for further consideration of Sprauve’s and Smith’s
claims consistent with this opinion.
As we held in Capogrosso v. Supreme Court of New Jersey,
“[i]nasmuch as § 1983 affords a remedy for infringement of
one’s constitutional rights, identical claims raised under the
Fourteenth Amendment are redundant, rendering the outcome
of the § 1983 claims dispositive of the independent
constitutional claims.” 588 F.3d 180, 185 (3d Cir. 2009); see
also Rogin v. Bensalem Twp., 616 F.2d 680. 686 (3d Cir.
1980) (in the context of the Fourteenth Amendment, “it
would be a redundant and wasteful use of judicial resources
to permit the adjudication of both direct constitutional and §
1983 claims where the latter wholly subsume the former.”).
Because section 1983 affords the appellants a remedy against
Boschulte in his personal capacity for the due process and
equal protection claims they have brought under the
Fourteenth Amendment, we will affirm the dismissal of these
direct constitutional claims against him as redundant.
Applying the same reasoning, because section 1983 similarly
affords the appellants a remedy against him in his personal
capacity for the free speech and free association claims they
brought under the First Amendment, we will also affirm the
dismissal of these direct constitutional claims against
Boschulte.
18